Market and product
Japan Earthquake to boost rubber prices
The globalization of commodities are seen as a rallying point in better price discovery mechanism for the producers but it has also given jitters locally because most price movements are based on sentiments than actual facts and figures.
It is the imaginary feeling that since Japan will take time to recoup from its disaster, its economy will take a beating and demand for Rubber could drastically fall which triggered the Rubber prices to the lowest levels in as much as three months.
Caught unaware, those who had bought the Futures in NMCE, India’s major rubber Futures destination are unable to dispose it off without any buyers quote in the exchange.
At TOCOM (Tokyo Commodity Exchange), the August Futures of rubber fell to 383.5 yen a kilogram. TOCOM demand is directly proportional to country’s transport demand and the fall is understandable. But its impact has hit the Kerala traders very badly as prices just made a free fall.
These sentiments also did not register the fact that Japan is not the only country for rubber consumption. Analysis shows rubber demand is on the rise.
China, not Japan, is the largest consumer of Rubber and its Central bank increasing the interest rate by 50 basis has only put pressure on Rubber.
According to Shanghai Futures Exchange, natural-rubber inventories stand around at 58,058 tons, down by 62 % from last year’s highest inventory levels of 151,832 tons.
According to the Association of Natural Rubber Producing Countries, Natural-rubber consumption in China and India may rise 9 percent to 3.6 million tons this year and 5.2 percent to 991,000 tons respectively
Sales of passenger cars, according to Passenger Car Association, increased 16.2 percent Y/Y to 1.53 million last month.
Ideally all these factors should have put a cap on the fall but it didn’t because sentiments had an upper hand over reality.
Rubber is part of parcel of a typical Malayali family. This is the reason why television channels ran extended news on Japan’s disaster for the average person to know the scale of quake and determine when their favorite commodity can bounce back.
