Kochi: India’s tyre makers are worried that speculation in the futures market could result in the price of natural rubber rising in the domestic market, forcing them to import the commodity.
They were forced to do this in the peak rubber season between November 2006 and January this year, and have already budgeted to import one lakh tonnes of rubber in 2007-08, up from 87,315 tonnes in 2005-06.
The current price of rubber is Rs84 a kg in the domestic market as compared to Rs93 a kg in the export market, but last year (2006-07), tyre makers were forced to import rubber, according to D. Ravindran, director general, Automotive Tyre Manufacturers Association, an industry body, following a rise in price in the domestic market, up to Rs100 a kg. Ravindran claimed that this was because of speculation in the futures market and the consequent tendency of rubber growers to hold back their crop, in anticipation of higher prices in the future.
Rubber costs: Speculation in the futures market may have resulted in an artificial shortage of the commodity.
“The futures market, driven by speculation, had given wrong signals to the growers that prices would go up by more than Rs120 a kg. As a result of this, they held back their stock, creating an artificial shortage,” he added.
Ravindran said he expected prices this year to stay at around Rs85 a kg, but added that he wants the Rubber Board to raise the issue of “speculation” with the commodities market regulator, Forward Markets Commission.
George Valy, president of the Indian Rubber Dealers Federation, the apex body of 20 dealer organizations across the country, said there is a need to keep a watch on the futures trade of the commodity. “It is important that the regulator steps in to curb speculation,” he added.
In 2006-07, while imports of natural rubber rose, exports of the commodity declined.
According to the finance director at Rubber Board, Viju Chacko, this was on account of the export-import cycle, although people in the trade who did not wish to be identified, said it was because certain exporters were shipping out poor quality of rubber.
India produces 8.03 lakh tonnes of rubber a year and does not play a role of any significance in the global market