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Monday, 2 January 2012 00:35 - - {{hitsCtrl.values.hits}}
The final auction for the year passes by quietly; outlook for 2012 bleak
By Cheranka Mendis
The rubber industry bid adieu to 2011 on a happy note, marking the year as the best in history for rubber producers, both small holders and plantation companies in Sri Lanka.
Colombo Rubber Traders’ Association (CRTA) Chairman M.S. Rahim told the Daily FT that the situation was created by the continued steady strong demand for natural rubber by Asian countries lead by China and India.
“In the first quarter of the year both Crepe rubber and RSS prices improved steadily with Crepe 1X continuing to improve from Rs. 570 to Rs. 670 in February. RSS1 price started the year at Rs. 555 and improved to Rs. 630 by February,” he said.
However, the industry experienced a sudden drop by mid march where prices dropped to Rs. 500 for Crepe 1x and Rs. 450 for RSS1.
The drop was short-lived and the industry saw a quick turnaround by the end of March where the price of Crepe 1X fetched Rs. 700 in one auction sale and RSS1 reached Rs. 654. These were the highest-ever recorded prices.
“It was a good year with rubber fetching approximately Rs. 600 and even 700 within the year.”
The auction price for Crepe IX rubber remained over Rs. 600 per kilo during the April till the end of September.
September marked the end of the ‘boom’ period for rubber and from October onwards, prices tumbled rapidly to reach Rs. 360 per kilo on 27 December.
However, the final auction for the year held on 30 December ended on a very quiet note with brokers not willing to sell for the prices offered by major buyers, Rahim said. He noted that on the final sale Crepe No.1 was quoted at Rs. 340 per kilo, ending the year below the price fetched for RSS1.
“RSS1 did not follow the fortunes of Crepe 1x, but remained fluctuating between Rs. 590 to Rs. 580 till the month of June and dropped further from July, steadily dropping to Rs. 370 by November.”
The price of RSS1 at the sale of 30 December was Rs. 365 per kilo.
Currently, the narrow price levels between top and bottom grades have been maintained due to the fact that local industry has been absorbing most of the lower grades of both Crepe and RSS grades.
The sharp drop in rubber prices was attributed to the world economy slowing down in Europe, USA and Japan. China is the world’s largest consumer of natural rubber and its economy is also slowing down as automobile sales continue to drop, especially with the European Union being the biggest market for their exports.
“All countries are struggling due to the European situation. Orders will not be coming.”
The outlook for prices in the New Year will remain in the doldrums and producer countries will have to arrange for a possible cut-back in production to prevent prices dropping further.“The market outlook will depend on the world economy situation, which is presently looking very bleak,” Rahim said. “The outlook is weak. We do not know what is going to happen.”
