India's rubber price rise is not abnormal

- Jun 26, 2019-

The price of natural rubber in Mumbai, India seems to be challenging the market. In the Kerala spot market, the price of natural rubber will rise 7% to 8% from the current level in the next 4 to 6 weeks, reaching 160-165 rupees per kilogram, although market participants expect production in the country from 2019 to 2020. Will increase. However, through the phenomenon to see the essence, the reason why the Indian rubber price continues to rise, the key is still the spot supply is still under pressure. In addition, the global rubber market supply and demand trends are also pushing factors.

From 2019 to 2020, India's natural rubber production is expected to increase by 15.7% to 750,000 metric tons. In general, an increase in production will put downward pressure on commodity prices. However, due to some irresistible factors, India's rubber supply is still facing a tightening trend, so the pricing has an exception.

Kerala’s rubber production accounts for more than 80% of India’s domestic production, but excessive rainfall and flooding in the region last year caused continued supply shortages. To make matters worse, the disease spreads on rubber plantations, and the leaves are not falling off properly, which affects the yield. The superposition of these factors has caused the price of rubber to rise all the way. Today, rubber prices have reached their highest level in two years. At present, the subsequent market impact of force majeure factors has not completely dissipated. In Coach and Kottayam, the widely traded RS-4 variety was sold at Rs 151-153 per kilogram, an increase of 1-2 rupees from the previous closing price.

According to official data, Indian natural rubber production fell by 7.5% between 2018 and 2019. And in view of the domestic production shortage, the inventory at the end of March was significantly lower than the same period last year. In the past few months, many small growers have stopped mining rubber due to high temperatures leading to a drop in production. This is bound to exacerbate the supply crisis.

The growth of the Tokyo Commodity Exchange rubber contract is also seen as an important factor supporting the spot price in India. Rubber futures have risen due to a decline in global production. According to data from the Association of Natural Rubber Producing Countries, global natural rubber production fell by 5.2% from the previous year. If global trade tensions continue to heat up, crude oil prices may fall, which will also put pressure on the rubber market supply. Not only that, in March of this year, the International Tripartite Rubber Council, consisting of Thailand, Indonesia and Malaysia, agreed to start production cuts in April. The international market supply situation is not optimistic. It is not difficult to understand the price increase in India.