Profit booking rubber price bumps; analysts see an increase of 7 to 9%

Domestic rubber prices extended losses to the third straight day on Tuesday, taking their cumulative losses to almost 2%. Despite some profit bookings causing a sideways to negative trend over the past few days, the industrial commodity has managed to hover near multi-year highs.

At

, rubber futures for May 31 delivery fell as much as 170 rupees, or 0.97%, to 17,400 rupees per 100kg. At this level, the contract is 2.19% off its 52-week peak of Rs 17,789 per cwt touched last week.

Rubber futures are quoted at 17,499 rupees in Tuesday’s latest afternoon bid count, down 0.40% for the day so far.

Rubber prices have been rising steadily since mid-April due to tight supplies amid increased demand for rubber gloves and packaging tapes.

“The global supply of rubber is running out due to stockpiling by China. US automakers are aggressively active before there is a squeeze in markets,” said NS Ramaswamy, Head of Commodities at Ventura Securities, at ETMarkets.

US PMI data and crude oil movements are likely to influence rubber rates, he said.

Last week, while a sluggish trend was seen in rubber prices in major international markets, domestic prices continued to rise as spot activity was affected by the Kerala lockdown.

“Negative economic data from the United States last week and weaker than expected Chinese data released on Monday triggered profit taking on this industrial commodity. However, weakness in the dollar index and strength in global equities limit the falling prices,” said Manoj Kumar. Jain, Director and Head of Commodity Research, Prithvi Finmart.

Analysts say tight supplies should continue to support rubber going forward due to Covid-related restrictions, but some volatility cannot be ruled out in the very short term.

“While the lingering pandemic may continue to influence overall market sentiments, economic data from China may initially set the tone for the market…Rs 180 per kg may act as a key near-term level of recovery,” said Anu V. Pai, Senior Commodity Research Analyst at Geojit Financial Services.

The Kerala government has extended the statewide lockdown until May 23. This is positive for the product, although some easing has been given to some sectors, including the sale and transport of natural rubber from May 17 to 21, she said.

Kerala, which is the country’s top rubber producer, initially imposed a lockdown from May 8-16 to curb coronavirus infections. India is the world’s second largest consumer of natural rubber, behind China, and the world’s sixth largest producer.

“Easing of lockdown restrictions in the US, EU and UK could also support prices in international markets,” Jain said.

Prices for rubber, widely used in high-demand industries in the automotive, aerospace, electronics, healthcare and power transmission sectors, rose more than 14% to now this year (at Monday’s closing price).

Technical view
Near-month futures on MCX are likely to head towards Rs 18,500-19,000 per cwt in the near term, said Ramaswamy, who recommends a “buy” on the commodity for a target of Rs 19,000 with a stop loss at 17,000 rupees.

Jain said the current weakness in MCX Rubber is just profit taking with support for the contract expected around Rs 17,350-17,300.

He suggests buying MCX rubber futures on dips around Rs 17,350-17,300 for a target of Rs 17,600-17,700 with a stop loss at Rs 17,150.