NR Speculation a Concern in India

An association representing seven of the largest tyre manufacturers in India has expressed concerns that futures market speculation could lead to rising natural rubber prices in the domestic market, forcing manufacturers to become reliant upon imports – as was the situation in December 2006 and January 2007.

While the current domestic market price of rubber in India is Rs84 (£1.03) per kilogram compared with Rs93 (£1.14) a kilogram in the export market, last year tyremakers were forced to import rubber when domestic market prices shot up to Rs100 (£1.23) a kilogram. The director general of India’s Automotive Tyre Manufacturers’ Association, D. Ravindran, believes that speculation in the futures market and a resultant decision by rubber growers to hold back their crop in anticipation of higher prices led to this sizeable price increase. “The futures market, driven by speculation, had given wrong signals to the growers that prices would go up by more than Rs120 a kilogram. As a result of this, they held back their stock, creating an artificial shortage,” he stated.

Ravindran added that he expects prices this year to stay at around Rs85 (£1.04) a kilogram, but he would like the Rubber Board to raise the issue of “speculation” with the commodities market regulator, the Forward Markets Commission. These sentiments were echoed by George Valy, president of the Indian Rubber Dealers Federation, who said “it is important that the regulator steps in to curb speculation.”