Rubber industry ends 2012 on a quiet note, but profitable for producers

By Cheranka Mendis

The rubber industry bids adieu to 2012 on a quiet note, maintaining steady levels in pricing at an average Rs. 380-400, making 2012 a highly profitable year for producers.

Quantities of rubber auctioned however have dropped by 1.47 million tons this year from the previous year due to lower prices and the not-so-kind weather pattern that prevailed throughout the year.

While 2011 was deemed a good year with rubber fetching approximately Rs. 500 and even Rs. 600 within the year, 2012 did not do too bad, Colombo Rubber Traders’ Association Chairman M.S. Rahim said.

Rahim told the Daily FT that prices came down in rupee terms and production dropped, but overall the year was a profitable one for producers.

With 2011 ending with white crepe, the best crepe in Sri Lanka, at Rs. 340, the year saw prices of crepe rubber increasing to Rs. 430 within 15 days since the final auction in 2011.

From there on, an average price that ranged over Rs. 400 was seen during the January-March period to reach an incredible high of Rs. 480 in April. This is reported as the highest price achieved for the year. Maintaining the figure till May, prices then began to fluctuate to close the year at Rs. 390-400. “We hit rock bottom in August only to recover by the end of the year.”

Rubber...

“The year opened on a low tone,” Rahim said. “However, the industry recovered and reached heights of Rs. 480 in crepe, to fluctuate downwards with mild recovery in September. The fourth quarter ended below Rs. 400.”

He explained that the lower prices were due to the inconsistent buying pattern in the European market, which is Sri Lanka’s largest export market for crepe rubber. This is seen as an after-effect of the recession. Germany and Italy are the country’s key rubber export markets.

Quantity of RSS rubber at the auctions increased this year as a result of the decrease in the price for crepe.

In 2012 quantity of crepe rubber sold was 10 million tons as against 2011 where 12 million tons were sold. Quantity of RSS rubber increased by 1.27 million tons from 1.5 million tons last year to 2.7 million tons this year.

Overall in 2012, 12.37 million tons of rubber (crepe and RSS) were auctioned, which included 9.65 million tons of crepe and 2.72 million tons of RSS. In the previous year, the total quantity of rubber auctioned was 13.84 million tons – 12.34 million tons of crepe and 1.50 million tons of RSS.

Rahim said: “In Sri Lanka, besides crepe, RSS is mostly consumed by the local manufacturers. However, only the likes of Kelani and DSI manufacture tyres for domestic consumption. We must increase our production of such rubber-related goods here rather than importing from elsewhere.”

The bulk of tyres for local consumption are imported, he said. “For industrial exports, we buy the naked rubber from the local market and import close to 50% of the necessary material from overseas.”

The imports consist of reprocessed oil, carbon black, chemicals to strengthen and weaken the rubber, and synthetic rubber, etc. “We must try eliminate that,” he said. “Due to the increase in consumption in Sri Lanka, manufacturers must concentrate more on the local market.”

Rahim noted that the industry would face the New Year with an extremely uncertain outlook for 2013. There is a fall in consumption overseas and it looks quiet and non-committed, he said.

“We are waiting to see what will happen after the holidays and for the forecasts from our key markets for their economies and the industry. It could be a slow year for the industry.”