Rubber likely to cntinue bull run says Sangeeth C Cherian

Rubber Climbs to Two-Week High on Speculation China Demand to Keep Growing

• Rubber advanced to a two-week high on speculation that demand in China, the world’s largest consumer, will keep growing after Sumitomo Rubber Industries Ltd. said it will expand tire output in the nation. Futures in Tokyo climbed as much as 1.9 percent to the highest level since July 12. The price has gained 1 percent in July, heading for the first monthly advance since March.
• Sumitomo Rubber, Japan’s second-largest tire maker after Bridgestone Corp., will invest $297 million to set up a factory in Hunan province, the company said in a statement yesterday. It will be the company’s second factory in China and start production in July 2012, it said.

India rubber seen up on limited supply, demand

Indian rubber prices, may edge higher this week on thin supplies and robust demand, but sharp rise is unlikely as market is expecting significant amount of imports next month.

• “Supply situation is not improving. Last week Kerala got rainfall,” said Mathew Thomas, a dealer based in Kochi, Kerala.
• Tapping usually slows down during rainy season in the southern state of Kerala, the country’s biggest producer.
• The spot price of the most traded RSS-4 rubber (ribbed smoked sheet) rose by 50 rupees to 18,150 rupees per 100 kg in Kottayam, Kerala, on Monday
• Demand is likely to go down next week. Tyre makers have already signed import deals and we are expecting shipments next months,” Thomas, who is also a member of The Indian Rubber Dealers Federation (IRDF), said.
• India’s rubber output rose 5.1 percent to 57,000 tonnes in June on higher tapping, while consumption edged up by 1.1 percent to 75,000 tonnes on good demand from tyre makers, the Board said.
• The Board estimates output in the south Asian country to rise by 7.5 percent to 893,000 tonnes in 2010/11 and consumption by 5 percent to 978,000 tonnes.
• Car sales in India rose an annual 30.8 percent in June, an industry body said on Thursday, as a rapidly expanding economy continues to pull buyers to showrooms.

There will be strong resistance at 190-191 level so be very cautious at this level

In India,  NMCE Rubber futures looked positive .  The most traded September series closed at Rs.17950 gaining Rs.327. It witnessed a high of Rs. 17998 and a low of Rs. 17515. Total traded volume on NMCE was 7552 lots and total open interest was 4878 lots.

The seasonal production of natural rubber (NR) in India has increased moderately this monsoon. The combined production in June and July increased to 114,500 tones from 104,505 tones. Increased soil moisture due to better rain resulted in the rise in productivity. Also, there was a substantial increase in guarding of tress during rain which increased tapping. Farmers invested more in rain guarding as the commodity is attracting high prices. The price of benchmark grade RSS-4 is at Rs 185 a kg at present. The Rubber Board’s latest estimates also indicate the tapping area increased, resulting in a rise of 11,000 tonnes in production. In some places growers started tapping the high yielding Clone-400 series. In July, production increased to 57,500 tonnes compared to 50,250 tonnes in the same month last year.

Meanwhile, in April-July, production increased 6.5 per cent at 223,250 tonnes as against 209,825 tonnes in the same period of the previous financial year. During April-July period of 2009-10, production declined 13 per cent. In April-June period of the current financial year, production increased 4.1 per cent, while consumption increased 5.2 per cent. Contrary to the production-consumption pattern of the commodity till June, consumption has grown at a lower pace in April-July as it increased to 307,550 tonnes, registering a growth of only 3.3 per cent.

The Rubber Board data showed that July consumption dropped to 77,500 tonnes from 78,910 tonnes in July 2009. Even though the supply condition in the open market is tight at the much higher price tag, the board’s data assures a total stock of 220,083 tonnes in the country as on July 31 as against 188,090 tonnes in the same month last year. In April-July, 53,139 tonnes were brought into the country as against 70,328 tonnes in the same period of 2009-10. According to the board, the drop in imports was mainly due to higher international prices till the first week of June. Meanwhile, there were nil exports in July as against 30 tonnes in last July. The total exports during April-July were 4,335 tonnes as against 878 tonnin the same period of last financial year.

Weekly Strategy*

1) Go long above 18865 for a target of 18980 with a Stop Loss at 18775

2) Go short from 18750 for a target of 18650 – 18540 with a Stop Loss at 18860

3) Go short from 18980 for a target of 18800 with a Stop Loss at 19030

4) Go long from again 18525 for a target of 18650 with stop loss at 18470 .

Sangeeth can be contacted @ [email protected]