NO FRESH FUNDAMENTAL NEWS THAT TRIGGERED BUYING IN NATURAL RUBBER
rubber

NO FRESH FUNDAMENTAL NEWS THAT TRIGGERED BUYING IN NATURAL RUBBER

Samarth Mercantile

*Investors may have stepped up investing as rubber prices tend to rise in January ahead of China's Lunar New Year

*Thailand, Indonesia and Malaysia have pledged to immediately withhold exports of 350,000 ton of rubber until March 2018


There were no fresh fundamental news that triggered buying in natural rubber, but investors may have stepped up investing as rubber prices tend to rise in January ahead of China's Lunar New Year. The Lunar New Year, which falls on 16 February, is celebrated in most parts of northeast and southeast Asia, with the key Chinese market on holiday on 15-21 February. The Tokyo Commodity Exchange (TOCOM) rubber contract for June delivery finished up at 209 yen per kg. Earlier on 9 January it touched its highest since Sept. 28 of 215 yen.

The TOCOM's rally may be short-lived as the rubber market is not fundamentally strong. The most-active rubber contract on the Shanghai futures exchange for May delivery rose at 14,445 Yuan ($2,247) per tonne. In India spot Kottayam, RSS-4 Rs. 12,950 ($203) per 100 Kg. Asian’s big three rubber producers Thailand, Indonesia and Malaysia have pledged to immediately withhold exports of 350,000 ton of natural rubber until March 2018 under the framework of the International Tripartite Rubber Council’s (ITRC) Agreed Export Tonnage Scheme (AETS).

The pledge was made during the ITRC senior officials meeting on Dec 22, 2017 in Bangkok and will be closely monitored by the ITRC monitoring and surveillance committee. The International Rubber Consortium Limited (IRCo) said the countries are confident the natural rubber prices will recover and continue to be fair and remunerative to all rubber industry, with the joint implementation of these measures. The AETS will be implemented through their respective domestic regulators, including addressing business commitments under existing forward contracts.

From now onward, Cambodia’s rubber output will increase every year up to 2023. Planted it in 2005, 2006 and 2007, and now it’s time for harvesting. In 2017, Cambodia’s rubber exports rose 36 percent to 190,000 tonnes. Land used for rubber plantations is also on the rise, with the country now having 7,000 hectares planted with rubber. The expansion of rubber plantations across India's north-eastern states may threaten the traditional rich diversity of the region's forests as has happened across Southeast Asia, scientists have cautioned.

Tripura, which is India's second-largest rubber-producing state after Kerala, now, has over 70,000 hectares, or nearly 7 per cent of the state's land area, under rubber plantations, compared to under 700 hectares in the mid-1970s. Assam's rubber cultivation has increased three-fold to over 49,000 hectares over the past decade, while Manipur, Meghalaya, Mizoram and Nagaland have also seen increases in areas under rubber plantations in recent years.

A study by University of East Anglia researchers had predicted that 4.3 to 8.5 million hectares of new plantations would be required to meet projected the global rubber demand by 2024. The Indian natural rubber plantation industry, which is passing through a period of crisis on account of the continuing slump in price, may get another jolt if the Union government gives in to the pressures from the manufacturing industry to allow the import of cup lump rubber. If so, the Indian farmer who gets Rs.160 a kg will abandon the value addition process and go for manufacturing cup lump rubber which will not fetch even Rs. 60 a kg then. Date: 18-1-2018

Samarth Mercantile

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