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17. August 2006

INDIA: Rubber exports could run into rough weather

Source: Daily "The Hindu Business Line", New Delhi; 17 Aug 2006

Chennai , Aug 16
Rubber exports could face problems if the difference
between international and domestic prices continues to
narrow down, according to industry officials.

"So far, rubber exports have been good. But if the
differences narrow down, then exports could slow
down," said Prof K.K. Abraham, President of the Pala
Rubber Marketing Co-operative Society.

Shipments

During the current fiscal, 31,000 tonnes of rubber
have been exported up to July, against 10,000 tonnes
during the corresponding previous period. The Pala
society itself shipped some 7,000 tonnes (6,500
tonnes).

"We will lose the price advantage as the gap narrows,"
Prof Abraham said.

On Wednesday, RSS-4 (ribbed smoked sheet) quoted at Rs
93 a kg, while the comparable RSS-3 grade in the
global market quoted at Rs 100.22.

In the futures market, September contracts are quoted
at Rs 90.40, while October contracts ruled at 87.60.
Both the contracts slipped compared with Monday's
rates.

Prospects

"Export prospects depend on how the international
market behaves. Global markets are seen down next week
and here too, prices could decline. We expect the
momentum on exports to slow," Prof Abraham said.

A tyre industry official said that exports depend on
China buying consignments from India, but Beijing is
off the market currently. "No one knows when China
will enter the market. The uncertainty will reflect on
exports," the official said.

According to Prof Abraham, the bulk of the exports are
made to China and pickup in shipments depends on China
entering the market.

Rubber is exported to China mainly through two trading
firms, one based in Singapore and the other in
Malaysia.

"We have been able to send rubber to China through
these two firms. Through them, we have connected to
Greece and Ukraine too," Prof Abraham said. Besides,
export consignments are also finding their way to
Colombo.

Volatile market

The tyre industry official said that the global rubber
market was volatile and exporters would find it
difficult to trade in these circumstances.

"Growers and dealers would be unwilling to trade when
prices are volatile. Exports have to be steady."

The other factor affecting exports is delay in
reimbursement of the VAT paid by exporters to the
Kerala Government.

Under the VAT system, four per cent tax has to be paid
for buying rubber in Kerala.

"There is plenty of amount outstanding for
reimbursement. Unless one has Rs 10-20 million, you
can't export," Prof Abraham said.

"Otherwise, we could have seen small exporters
entering the scene."

According to trade sources, the Kerala Government is
yet to reimburse exporters fully for the VAT they paid
last fiscal. "So, not a single paisa has been
reimbursed this fiscal."




(Syed Rashid Ali, Karachi, Pakistan)

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