Natural Rubber Prices

Farmers have been protesting against the government over the sharp fall in Natural Rubber prices in the Indian market.

manishsiq Published On September 16th, 2022 Leave a comment

Table of Contents

Natural Rubber Prices: Caused the Sharp Fall

Global factors: The current fall in prices of Natural Rubber is attributed primarily to a weak Chinese demand and the European energy crisis.
- China factor: The ongoing zero COVID strategy in China, which consumes about 42% of the global volume, has cost the industry dearly.
- European energy crisis: Gas prices in Europe spiralled by 30% as Russia shut the pipelines. These soaring energy prices severely impacted the Natural Rubber demand outlook in the region.
- Tight monetary policies: Rising global inflation and the possibility of a global recession have increased regulatory pressures like hikes in interest rates. This has led to a fall in demand and quenched prices.
Domestic factors:
- Import glut: The domestic tyre industry is currently having an ample inventory, especially in the form of block rubber imported from the Ivory Coast and compounded rubber from the Far East.
- Slack season: The second quarter is generally a slack season for the tyre market, but heavy rains and flooding in several places have further squeezed demand in India.

Impact in rural areas: The impact of the price fall is felt more in the rural areas, where most people are solely dependent on rubber cultivation and have no other option but to cut expenses.
- It may also trigger a crop switch or even a fragmentation of the rubber holdings in the long run.
Impact on Small and Medium Enterprises: As most of the production occurs in small and medium enterprises, the falling price could lead to their uncertain future and force them to stop production temporarily.
Impact on Kerala economy: The state accounts for almost 75% of rubber production in India. The price fall has caused a sluggishness in the respective local economies and could lead to a major panic in villages of Kerala.

Indian scenario: Price of the RSS 4 variety, used chiefly by the tyre industry, has registered a 16-month low in the Indian market.
Global scenario: The plunge in the international rubber market is even more than in India. In comparison, the international tyre grade RSS 3 variety plummeted by 21% over two months which is 16% for RSS 4 in the Indian market during the same period.

Natural Rubber (NR) is produced from latex obtained from rubber trees in plantations.
The most important forms in which NR is processed are the following: Sheets, Crepes, Block Rubber and Preserved Latex Concentrates.
Two types of Sheet Rubber are produced and marketed in the international market, namely the Ribbed Smoked Sheets (RSS) and the Air Dried Sheets (ADS).
Among these two types, Ribbed Smoked Sheet is the most popular and is available for consumption.
There exist different grades of Ribbed Smoked Sheets rubber, namely RSS IX, RSS 1, RSS 2, RSS 3, RSS 4 and RSS 5.

Grade	Used for the Manufacturing
RSS – 1X	Aero tyres
RSS – 1	Tubes (NR)
RSS – 2	Extruded hoses, Quality Footwear items
RSS – 3, RSS – 4	Tyres & Tubes, Tread Carcass, Off road tyres & ADV tyres, Extruded hoses, Footwear
RSS – 5	Cheap items, hand – made hoses

Production:

India is currently the fifth largest producer of Natural Rubber in the world with one of the highest productivity.
Top Rubber Producing States: Kerala > Tamil Nadu > Karnataka.

Consumption:

India is the 2nd largest consumer of Natural Rubber globally.
About 40% of India’s total natural rubber consumption is currently met through imports.
The leading countries exporting natural rubber to India were Thailand, Vietnam, Indonesia and Malaysia.