To understand the behavior of NR prices across key markets, during , with focus on:

Transcription

1 Jom Jacob The Rubber Board*, India (* The views presented here do not necessarily imply those of the organization ) To understand the behavior of NR prices across key markets, during , with focus on: The trends, trend-breaks and volatility. To identify the key determinants of the prices. To make an assessment on the emerging trends in global supply & demand and their potential influence on NR market. 1

2 July 8 US financial crisis. Drastic fall in auto sales. Global economic crisis. US $ strengthens. Oil falls to 68US$/barrel. Contract defaults in NR markets Prices of STR 20 & SMR 20 Oct Tightness in supply. Flow of financial capital Appreciation of Baht, Rupiah, RM. 2010: Q1 to Q3 Demand slows down. 2011: EU crisis aggravates. Inflation in China & India. Demand slows down. Shift to SR May 8 Financial capital flow to Commodities. Oil touched 143 USD/barrel. Supply slowed down. March 2011 Tsunami n Japan Sep. 9. Economic stimulus measures Cash for clunkers. Crude oil recovers. NR supply falls on adverse weather. Export curtailment under ITRC. Strengthening of Baht, Rupiah, RM. Capital flows to Asian financial markets. 6 Jan 07 6 Mar 07 6 May 07 6 Jul 07 6 Sep 07 6 Nov 07 6 Jan 08 6 Mar 08 6 May 08 6 Jul 08 6 Sep 08 6 Nov 08 6 Jan 09 6 Mar 09 6 May 09 6 Jul 09 6 Sep 09 6 Nov 09 6 Jan 10 6 Mar 10 6 May 10 6 Jul 10 6 Sep 10 6 Nov 10 6 Jan 11 6 Mar 11 6 May 11 6 Jul 11 6 Sep 11 6 Nov 11 6 Jan 12 6 Mar 12 6 May 12 6 Jul 12 6 Sep 12 2

3 Prices of RSS 3 in Bangkok & RSS 4 in Kottayam RSS-3 Bangkok Jan Feb Mar May Jun 07 4 Aug Sep Oct 07 8 Dec Jan 08 1 Mar Apr May 08 5 Jul Aug Sep 08 8 Nov Dec Jan Mar Apr 09 6 Jun Jul Aug Oct Nov 09 2 Jan Feb Mar 10 8 May Jun Jul Sep Oct 10 4 Dec Jan Feb 11 9 Apr May 11 2 Jul Aug Sep 11 5 Nov Dec Jan Mar Apr 12 2 Jun Jul Aug 12 6 Oct Prices of RSS & TSR 600 RSS-3 Bangkok Jan Feb Mar May Jun 07 4 Aug Sep Oct 07 8 Dec Jan 08 1 Mar Apr May 08 5 Jul Aug Sep 08 8 Nov Dec Jan Mar Apr 09 6 Jun Jul Aug Oct Nov 09 2 Jan Feb Mar 10 8 May Jun Jul Sep Oct 10 4 Dec Jan Feb 11 9 Apr May 11 2 Jul Aug Sep 11 5 Nov Dec Jan Mar Apr 12 2 Jun Jul Aug 12 6 Oct 12 3

4 STR-20 Bangkok SMR-20 Kuala Lumpur RSS-3 Bangkok RSS-4 Kottayam 4

5 RSS 4 SMR 20 RSS 3 STR

6 , 11, , , , 9, , 50 8,

7 NR prices cannot be explained exclusively on demand and supply. NR is an internationally traded commodity and its production is export-oriented in major producing countries. Thailand: 88 % exported Indonesia: 87 % exported Currency rates against US$ hold a profound influence on the prices. Due to speculation on possible substitution between NR and SR, crude oil market can influence NR prices. Japanese yen can influence through TOCOM rubber futures. Hedge funds can drive rubber market through speculative investment decisions in response to changing economic outlook, policies and geopolitical developments. 7

8 Currency Indices and NR Price Indices Currency Index NR price index Jan 07 6 Mar 07 6 May 07 6 Jul 07 6 Sep 07 6 Nov 07 6 Jan 08 6 Mar 08 6 May 08 6 Jul 08 6 Sep 08 6 Nov 08 6 Jan 09 6 Mar 09 6 May 09 6 Jul 09 6 Sep 09 6 Nov 09 6 Jan 10 6 Mar 10 6 May 10 6 Jul 10 6 Sep 10 6 Nov 10 6 Jan 11 6 Mar 11 6 May 11 6 Jul 11 6 Sep 11 6 Nov 11 6 Jan 12 6 Mar 12 6 May 12 6 Jul 12 6 Sep 12 Crude Oil Prices and TOCOM RSS-3 Prices 550 Brent crude oil spot Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct 12 8

9 Ln Price NR = Ln Price Oil (t-ratio: 20.1) Each % change in crude oil price induces 0.74 % change in NR price in the same direction. It is through the TOCOM rubber futures that significance of Japanese yen arises among the key drivers of NR prices. Japanese yen is one of the currencies which investors often consider as a safe-haven under an uncertainty. Whenever the yen gains strength, the BoJ intervenes in view of the potential damage of a stronger yen to the export-dependent economy. 9

10 Japanese Yen and TOCOM RSS-3 Futures Jan Feb Apr 07 2 Jun Jul 07 8 Sep Oct Dec 07 2 Feb Mar May 28 Jun Aug 08 4 Oct Nov Jan Feb Apr 09 6 Jun Jul Sep Oct Dec 09 6 Feb Mar May 3 Jul Aug 10 9 Oct Nov Jan 11 5 Mar Apr Jun Jul Sep 11 5 Nov Dec Feb Mar May 7 Jul Aug Oct Commodity markets have emerged as the most important avenue for speculative investments. Near-zero interest rates in advanced countries attract investment funds to fastgrowing Asian markets. Flooding of such funds can causes boom in commodity prices through speculative investments. 10

11 Under uncertainty, they leave commodities to safe-haven currencies or gold. The period from Q onwards has seen a sharp reduction in speculative investments in response to the Euro crisis, political unrest in the Middle East and North Africa, and the tsunami in Japan Tocom futures Jan Feb Apr 07 2 Jun Jul 07 8 Sep Oct Dec 07 2 Feb Mar May Jun Aug 08 4 Oct Nov Jan Feb Apr 09 6 Jun Jul Sep Oct Dec 09 6 Feb Mar May 10 3 Jul Aug 10 9 Oct Nov Jan 11 5 Mar Apr Jun Jul Sep 11 5 Nov Dec Feb Mar May 12 7 Jul Aug Oct 12 11

12 Ln(RSS3) Bangkok = Ln(RSS3) Tocom (t-ratio: 35.69) R 2 =

13 Yielding area expanded this year by 115,000 ha. But, average yield is on a decline. Supply cannot rise beyond 0.6% this year. Export curtailment under the ITRC can take the supply to negative territory. ITRC decided to curtain exports by,000 ton during the period from October 2012 to March Yielding area expanded 67,000 ha in Fall in average yield this year will bring down production by at least 0.1%. ITRC s intervention can further lower the supply 13

14 Area under tapping has come down by 17,000 ha. There is a decline in average yield this year. This year s supply will be lower by at least 4.7% Non-ANRPC Aggregate ANRPC

15 China India World U.S. Euro Area

16 Q Q U.S Euro Area China India World Brent spot average in US$ / barrel Average for 2012: Average for 2013:

17 This year s low supply and the seasonal down beginning from December 2012 will stay as a plus factor until May But, the demand-prospects heavily depend on the emerging global economic situation. IMF s forecasts do not favour a revival of the demand sector during No marked recovery is expected for 2013 either. Oil forecasts are not favourable to NR at least till the end of Economic uncertainties are likely to reduce the appetite for speculative investments. Investors would rather prefer safe-haven gold and strong currencies. Despite a very low supply, NR market is unlikely to gain momentum until the global economy takes a clear recovery path. 17

18 Thank you for your attention 35 18