Date:27/05/2006 URL: http://www.thehindubusinessline.com/2006/05/27/stories/2006052703860800.htm

Back 11 pc rise in rubber prices within a week

Vipin V. Nair

Futures hit trade ceiling on NMCE; July contracts top Rs 120

Stretching gains
Rubber prices gain on rise in TOCOM prices.
Increase due to fears of shortage and rise in crude rates.
However, a correction could be round the corner as positions are technically over-bought.

Kochi , May 26

Anybody who bought a tonne of natural rubber last week and held on to the stock would now be richer by Rs 10,000. In a matter of just six days, natural rubber prices in the domestic market have jumped 11 per cent to Rs 111 a kg.

The benchmark ribbed, smoked sheet (RSS)-4 grade touched the psychological Rs 100-mark for a kg on May 19. On Friday, it touched Rs 111 a kg.

Biggest jump

"I have sold rubber at Rs 111," a trader said. "Certainly this is one of the biggest jumps (in prices) I have seen," he said.

Following the trends in international futures markets, natural rubber hit the ceiling limit of six per cent on the National Multi-Commodity Exchange (NMCE). June contracts increased to Rs 117.6 for a kg, while for July, the price moved up to Rs 120.6, from Thursday's Rs 110.9 and Rs 113.8 respectively.

"The futures markets were just following the TOCOM," the trader said.

A perceived shortage of natural rubber across global markets, rising crude prices that pushed up cost producing synthetic rubber and unabated demand have powered the prices to skyrocket to unprecedented levels.

Double in a year

Natural rubber prices have nearly doubled in one year. During May last year, the RSS-4 grade was traded in the region of Rs 59-63 a kg. Since the beginning of this year, prices have shot up by as much as 56 per cent. The current surge has taken the prices closer to the levels in international markets.

In Bangkok, the corresponding RSS-3 was traded at Rs 119.48 a kg, according to the Rubber Board.

The narrowing of price difference between Indian and international rubber would encourage more imports into the country. Tyre manufacturers have already said they plan to import 20,000 tonnes to tide over the shortage felt in the local markets.

"The SMR-20 (a grade of block rubber) is already lower than the RSS-4 grade here. Duty free imports under the Advance License Scheme now looks really attractive and feasible for tyre companies," the trader pointed out.

Buyers on toes

Aravindan reports from Kottayam: Covering groups and purchase agents were on their toes as the trend setting Japanese markets hit the upper circuit on hectic buying from major consuming countries. Sheet rubber shot up to Rs 110 a kg both at Kottayam and Kochi from Rs 106 a kg on Thursday.

Though the market is fundamentally strong, it was technically over bought and a correction was overdue, said Mr. Sajilnath of Geojit securities. While the spot market experienced acute short supply and thin volumes, the transactions were considerably better in futures.

Futures gain

The NMCE rubber futures added fantastic gains to its all contracts on Friday. The August contract was quoted at Rs 118.31 (Rs 111.61) and September at Rs 115.77 (Rs 109.22) a kg for RSS 4. The transactions totalled 4,453 tonnes till 2 p.m.

The June futures RSS 3 went up sharply to304.3 yen (Rs 124.75) from 295.5 yen a kg on TOCOM. Spot prices (Rs a kg) were: RSS-4: Rs 110 (Rs 106); RSS-5: Rs 104 (Rs 100); ungraded: Rs 99 (Rs 96); ISNR 20: Rs 100 (Rs 97) and latex 60 per cent (per litre): Rs 74 (Rs 74).