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Industry demands hike in natural rubber imports

There is no option but to further increase natural rubber (NR) imports, as speculation in futures market has created shortage in the physical markets, say rubber industry bodies, Automotive Tyre Manufacturers Association (ATMA) and All India Rubber Industries Association (AIRIA).

There is no option but to further increase natural rubber (NR) imports, as speculation in futures market has created shortage in the physical markets, say rubber industry bodies, Automotive Tyre Manufacturers Association (ATMA) and All India Rubber Industries Association (AIRIA).

The industry has written to market regulator, the Forward Market Commission (FMC), seeking brakes on futures price volatility by reducing the intra-day price fluctuation limit from the current 4% to 1%.

?Local futures trade in NR has once again gone into a binge of heavy speculation that has thrown the entire domestic rubber trade out of gear. Prices are up following expiry pressures of the just-expired September contract, despite volumes of less than 100 tonne in a day and stocks of less than 200 tonne. On September 14, the September contract zoomed up to 4% intra-day circuit limit, to close at R193. The trend was not in sync with fundamentals as physical price as per Rubber Board was R185,? says the letter. ?On September 15, when a strike was observed in Kerala and physical trade was closed, the September contract rose further by another 4%, and trade touched R201. Ironically, the traded volume on September 15 was just 48 tonne,? the letter notes. In fact, following frenzied speculation, physical market has pole-vaulted in no time. Prices as high as R200 per kilo are being quoted though the futures market was trading only nominal volumes. This happened when the international price of RSS3 was just

R170 (and Malaysian SMR20 only R153).

According to the industry?s letter to FMC, such ?illogical trends in futures trade? give wrong signals to all stakeholders, including growers. Beneficiaries are just speculators and the exchange operators.

Typically, under such circumstances, farmers and traders tend to hold stocks and consumers have no option but to contract imports, as availability thins out and also as landed price difference, too, is in the range of R25-30 per kg. However, both growers and traders stand at risk as such speculative trends do not last, and situation could get worse when heavy imports land up in peak production months.

?The current speculation in domestic futures is giving least consideration to demand-supply fundamentals,? says Vinod Simon, president, AIRIA.

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First published on: 22-09-2012 at 00:22 IST
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