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Friday, January 7, 2011

Rubber prices soar to record high

By Thushantha Jayatilaka

The prices at the Colombo Rubber auction yesterday reached a record level of Rs 605.00 for Latex Crepe No.1 due to high speculative bidding. The price range for Latex Crepe 1 was quoted between Rs 580 to Rs 600 with the average price per kilo at Rs 588. Sheet Rubber (RSS1) is currently selling at Rs 560 per kilo gram.

Commenting on this upward trend, Damitha Perera, Director Forbes & Walker Commodity Brokers told DM Business, the increase in prices is due to many rubber based industries locating their operations in India and China, and increase in internal demand for rubber in these economies. He also pointed out that record high vehicle production led by China and India has also been a key contributing factors.

The supply of rubber has seen a decrease due to adverse weather conditions in major rubber producing countries. Thailand, the largest exporter of rubber is expected to cut tapping of rubber from February to April for the so called wintering period, possibly pushing rubber prices further, according to industry reports
Furthermore natural rubber prices tend to follow the oil price and the gradual increase in oil is likely to further increase the price of synthetic rubber, thus making natural rubber a better alternative.

"The future rubber prices will also depend on the U.S economy. An improved performance by the U.S economy will put pressure on world rubber prices led by high demand for tires" a rubber industry stakeholder commented.

If rubber prices keep on increasing, it is likely to have a drastic effort on industries. "Currently tyre makers were struggling to secure required supplies as dealers were diverting stocks into warehouses and farmers holding stocks anticipating a further rise in price" said George Valy, President of the Indian Rubber Dealers Federation.

According to Perera, Sri Lanka a leading supplier of solid tyres and dipped products consumes over 60% of its production. This upward trend in prices is expected to continue according to industry experts.

The record rubber prices were also reflected in the Sri Lankan stock market as a number of rubber stocks attracted much investor interest.

source - www.dailymirror.lk