Virus Fear in China May Lead to Fall in Global Rubber Demand

With the India Rubber Meet 2020, the fifth in the series, organised in Chennai by India Rubber Meet Forum, a society formed by the Rubber Board and the stakeholder associations in rubber and related sectors, exactly a monthly away, there are worries that the spread of the virus in China, the largest rubber consumer, could slow down economic activity in the country and lead to a fall in demand. The meet is expected to focus on topics related to the future of the global and Indian rubber industry, global/Indian economy and commodity prices, the future of auto tyre, non-tyre and synthetic rubber industry. The earlier forecast was that the global natural rubber industry would keep increasing with an annual growth rate with 2 to 3 per cent, and a little higher speed in China. Interestingly, China is the largest consumption region of natural rubber, followed by Europe and the US. India's natural rubber imports fell 16.8 per cent on-month to 36,907 tonne in November, data from the Directorate General of Commercial Intelligence and Statistics suggested. 

Such a significant drop in imports is also seen deepening the supply crunch. However, the overall sentiment remains bullish due to an ongoing supply crunch. Tapping has been delayed despite it being the peak season, analysts said.

Meanwhile, natural rubber prices were down in Kerala's spot markets on Friday, last week as demand from stockists was weak after the recent surge in prices. In Kochi and Kottayam, the widely-traded RSS-4 variety was sold at Rs 136 per kg, down by Re 1 from last Thursday, traders pointed out. Going by Rubber Board of India statistics, prices in Kottayam and Kochi were at Rs 137.00 per kg, down by Re 0.50 in both the places.

“Rubber on ICEX dropped due to tepid demand from domestic stockists after a recent surge in prices. Pressure also seen as global demand for rubber is seen week due to slowing car sales in China, the world's top consumer. China Association of Automobile Manufacturer's data showed vehicle sales were down nearly 4 per cent in November,” said Ajay Kedia, director, Kedia Advisory. 

However, the downside seen limited as global output is projected to be lower due to a severe pest attack in major producing countries such as Thailand, Indonesia, and Malaysia. According to the Association of Natural Rubber Producing Countries, global natural rubber production in Jan-Jul fell 7.3 per cent on year to 7.04 mln tn, he said.

Kedia added that the Rubber Board has revised downwards the production, consumption and import target for the current fiscal year for natural rubber keeping in mind the uncertainties in the global economy. The projection for production in 2019-20 has been revised to 730,000 tonnes, a decrease of 20000 tonnes from the earlier target. The new consumption figure for the year is 1140,000 tonne against earlier 1270,000 tonne.

Akshay Agarwal, MD, Acumen Capital, on his parts, said, “ICEX Rubber is trading at 13894.0, down 240.0 points or 1.84 per cent currently. Prices dropped sharply in the early session driven by profit booking and with prices breaking below key support at 13950.0, we expect further downside in prices to 13750.0-13650.0 in the immediate term. On the upside, a break above 14000.0 could drive prices higher to 14200.0 and possibly higher next week.”