Asian rubber producers are shipping more of their stockpiles to India—an unlikely destination given it’s already well-supplied and ranks as the world’s fifth-largest producer of natural rubber.
But Indian buyers are skipping local rubber in favor of these imports from Thailand, Vietnam and Malaysia because the imports are up to 15% cheaper, even with a 20% tax imposed by Delhi.
Global rubber prices have sunk 25% this year because the market, valued at more than $30 billion a year, is awash in surplus supplies from Southeast Asia. Indian farmers, watching local prices hurtle below production costs, have reacted by holding back stocks.
“Farmers don’t want to release the material until prices move up,” said George Valy, president of the Indian Rubber Dealers’ Federation.
That opens the way for imports, which are meeting nearly half of India’s monthly rubber demand of 80,000 tons, up from about a quarter a year ago.
For buyers, the drop in prices is a boon. Tire makers are stocking up, said an industry official who did not want to be identified.
That would be welcome news for Thailand, the world’s largest natural rubber producer, which plans to unload a stockpile of 220,000 metric tons on international markets. It’s struggling with an overhang of supply that’s denting farmers income there too.
Indian rubber prices have firmed up marginally as local supplies have dried up, rising over the past fortnight to 150 rupees ($2.56) a kilogram— but that’s not enough to tempt local farmers to release more stocks.
Indian rubber producers usually tap some of their trees in May before the arrival of annual monsoon rains stops production, but this year hardly anybody has ventured forward.
Aside from low prices, one of the reasons that farmers have not tapped their trees is that yields are low. They are hoping for better output after the rainy season finishes in September.
Source:- blogs.wsj.com
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