Import fears, better supply hit rubber

Import fears, better supply hit rubber
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First Published: Wed, Apr 18 2007. 10 45 PM IST
Updated: Wed, Apr 18 2007. 10 45 PM IST
Mumbai: India’s benchmark rubber futures fell to its contract low on 18 April, on fears of a tariff cut for Thailand rubber, better local supply and lower demand from tyre makers, analysts and traders said.
The rupee’s recent strength against the dollar also left local producers nervous as it could make imports cheaper, they said.
“There is some news about reducing duties on rubber imports,” M.A. Augusthy, a Kochi-based trader said. “The weather in Kerala is also very good for tapping rubber and demand from tyre manufacturers is very low. All this is affecting the prices.”
The most traded contract for May delivery on the Multi Commodity Exchange of India (MCX) touched a low of Rs8,601 a quintal, compared with the previous close of Rs8,920.
Rubber for July delivery hit the lower circuit filter in early trading, falling to Rs9,245 a quintal.
Prices have fallen by more than 9% since the start of April on heavy inventories in exchange-monitored warehouses and specultive selling, traders said.
Producers are worried that a free-trade pact being negotiated between India and Thailand, the world’s top producer, could see import duties on the latter’s natural rubber falling to 5% from 20%.
Adding to the hit on sentiment from this pact, expected to be signed by June-end, was the rise in rupee, traders said. The Indian currency hit a nine-year high against the dollar this week and is hovering above the Rs42 level.
Tyre manufacturers could import as much as 100,000 tonnes this year compared with 84,000 tonnes last year, if import prices proved favourable, said D. Ravindran, director general, Automotive Tyre Manufacturers Association.
This could help them check domestic prices also, he added.
Local demand, mainly from tyre makers, stood at 820,000 tonnes in 2005-06, about 2.4% higher than a year earlier, data with state-run Rubber Board showed.
Natural rubber stocks on MCX-registered warehouses were at 613 tonnes on 16 April, compared with just 13 tonnes at the same time last year.
Stocks in the spot markets were around 170,000 tonnes, said Vinayak N.V., an analyst with brokerage Karvy Comtrade. He, however, expected the price trend to reverse soon.
“Internationally, prices are up so we could see a rebound from the current prices anytime soon,” Vinayak said. “Rubber is getting very good support at Rs8,200 for May contract. Prices could fall to these levels by this weekend.”
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First Published: Wed, Apr 18 2007. 10 45 PM IST
More Topics: Money Matters | Commodities |