Bonds, Currencies & Commodities
Rubber prices jump to record on supply concerns, rising demand from auto

Natural rubber prices are at their highest-ever, as heavy rain hampers production, increasing concerns that supply may not keep pace with demand

Natural rubber prices have climbed to record highs and are likely to continue to climb in the near-term on falling output by major rubber-producing countries and higher demand from consumers, particularly tyre manufacturers.

On Thursday, the prices extended their gains to hit a new record high of Rs213 a kg in the Kottayam market and Rs214 in Kochi, even as prices in overseas markets rallied on a supply shortage.

"The price of natural rubber in the international market is increasing sharply and that trend is reflecting in the domestic market too," George Vally, president, Indian Rubber Dealers' Federation, told Moneylife. The price went up by Rs2.50 a kg on Thursday after a one-rupee gain the previous day.

"The current price trend is driven by non-availability of production due to unseasonal rain on account of which the state missed out a favourable period of harvesting," Santosh Kumar, head of rubber sales at Harrisons Malayalam, told Moneylife. "The international price trend is also a factor." The RPG group company, which is based in Kochi, is India's largest producer of rubber and pepper.

Prices in the international and domestic markets have been rising daily since the start of the month. Yesterday, in Bangkok, the natural rubber price was at $525 per 100 kg. On 4th January, spot natural rubber in Malaysia climbed to $497 per 100 kg from $488 on 30th December 2010. In Thailand, the largest supplier of rubber, the price was at $502 per 100 kg on 4th January compared to $495 on 30th December 2010.

Mr Vally said, "Prices may go up further as there is still a difference between domestic and international prices." Mr Kumar added, "The prices will rule high till May."

Natural rubber is the main raw material for tyres, and prices have been moving upwards over the past two months, following heavy rain in rubber-producing countries in Southeast Asia that interrupted tapping and plantation activities.

The Association of Natural Rubber Producing Countries (ANRPC) has lowered its estimate for global natural rubber production in the October-December 2010 period, saying it would be down by 6.3% in the quarter compared to the previous corresponding period. It had previously estimated a 3.8% drop for the quarter. ANRPC represents countries that account for 92% of the global rubber output.

The association estimates that the production in India would be 4.6% lower in the October-December period from that in the corresponding period a year ago. This is a change from the 1.8% drop it estimated earlier. It attributes the lower production to the unseasonal rain in Kerala, the largest rubber-producing state in the country.
The dealers' federation chief said that while the market expects a slight slowdown in production in India, growth in production is taking place. "I don't see any fall in production in the current year," Mr Vally said. "The rising price of natural rubber globally is encouraging rubber producers to increase production, and now the weather is very favourable."
The Rubber Board of India expects the country's yield area could expand by 14,000 hectares in 2011, helping supply to grow at 5.3% to 890,000 tonnes during the year.

"There is heavy rain in rubber-producing areas in Kerala which may hamper production, but tapping goes on in summer also," Mr Vally said. "Normally tapping gets over by January, but it would be extended till March. As per the Rubber Board of India, we have a stock of three lakh tonnes, so we won't face a deficit."

However, there is another point of view which suggests that there will be a drop in production despite the extended tapping season. "Tapping may go on till March as rain got delayed this year, but the quantity will drop. When does the drop take place, we need to look into," the Harrisons Malayalam official said.

The increase in demand for tyres from auto makers in India and outside is another reason for rising rubber prices. According to the Automotive Tyre Manufacturers' Association, production of tyres increased by 15% to 8,56,396 in November from the corresponding period a year ago. Export of tyres also increased by 19% in November on higher demand. Tyre output in the first eight months from April to November surged 26% to 7.7 crore from the previous corresponding period.




6 years ago

But the producers of NR is not getting the benefit due to very low productivity on account of weather conditions and sharply increasing wage in this sector

SEBI warns investors regarding two Sahara group companies

Mumbai: Market regulator Securities and Exchange Board of India (SEBI) today warned investors that two Sahara Group companies have been raising funds without its approval and said it will not be able to redress any complaint in this regard, reports PTI.

The regulator, in a public notice, said investors of Sahara India Real Estate Corporation (SIRECL) and Sahara Housing Investment Corporation (SHICL) should take investment decision at their own risk.

"SEBI will not be able to provide redressal to any investor on any complaint in connection with these OFCDs (Optionally Fully Convertible Debentures)", the notice said, pointing out that the two companies have not sought regulatory approval from SEBI for raising funds.

The two Sahara group companies have been raising funds through OFCDs, which SEBI said "were not issued in compliance with the applicable SEBI regulations..."

Furthermore, the notice added, "the Red Herring Prospectus submitted to the RoC (Registrar of Companies) has not been vetted by SEBI with reference to compliance to SEBI regulations."

The public notice, it added, is being "issued to safeguard the interest of investors."

The regulator further said that it had been receiving complaints alleging that SIRECL and SHICL have been issuing OFCDs to the public for many months with varying face value and maturity period extending up to 15 years.


Inflation, current account deficit to hit D-Street this year: Report

New Delhi: Wiping out hopes that the stock markets will scale new highs in 2011, a report said that the year will rather bring negative returns for the Indian equities, with a string of disappointing cues from the domestic arena, reports PTI.

"In all likelihood, 2011 will be a year of negative returns for Indian equities. Growth in capital formation is faltering, current account deficit is widening due to rising energy import dependence, inflationary pressures are building up and policy rates are set to further harden," a report by brokerage house IIFL said.

In the year gone by, the stock market's benchmark Sensex gave a modest return of over 17% and witnessed an all-time high closing on Diwali day.

However, in the current year, the equity markets will have to struggle with the current account deficit, which is running over 3% of the gross domestic product (GDP). The widening current account deficit will slow down the foreign capital flows which in turn will upset several macro economic variables, it said.

Besides, rising energy import dependence, coupled with the recent spike in energy prices, is also a concern for the domestic stock markets.

Also, inflationary pressures are likely to dictate the Reserve Bank of India's (RBI) monetary policy outlook in the first half (H1) of 2011.

"While headline wholesale price index (WPI) will decelerate year-on-year (YoY) till January this year due to the higher base, the medium-term outlook for inflation is already changing for the worse-and this will dictate RBI's monetary policy outlook," it said.

If the rupee comes under pressure owing to a slowdown in capital flows, it can potentially aggravate the inflationary outlook. It is now widely expected that policy rates will rise by 50 bps in the monetary policy review this month, the report noted.

It also feared that consensus growth estimates will see downgrades, and deterioration in the earnings mix will weigh down market valuations.

Meanwhile, on a brighter side the report showed optimism that software and pharma sectors remain strong and the growth environment is very favourable for them in this year.

Besides, the country's FY' 11 fiscal deficit will be at 5.1% of GDP, much lower than the budgeted 5.5%, it said. The bonanza from the third generation (3G) spectrum auctions, higher than budgeted tax collections will help more than offset higher government expenditure and higher oil subsidies this year.


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