NEW DELHI, July 8: Rubber prices, which slid by Rs 200 a quintal last week, are likely to decline further and remain soft at least until the first quarter of next year, rubber industry sources said.

`Primarily the prices will decline now because the lean tapping season is coming to a close. While in the run up till next summer, the prices will still be subdued since the recession in the automotive tyre sector is yet to be over,' the sources said.

Rubber prices, which had touched Rs 7000 a quintal two years ago and averaged around Rs 6000 a quintal last year, slumped and remained stable at Rs 4100 a quintal.

But last week, the prices declined further and closed at Rs 3900 a quintal, will tend to naturally crash during the peak tapping season the sources said.The sources said there was a lull in rubber market both in India and abroad and it had also contributed to the weak prices.

Moreover, at least three lakh second-hand tyres were likely to come into the country following the government's decision to allow import of second-hand tyres and this too would bring down the demand for the commodity drastically.

Yet, another reason was that the carry over stock of rubber had touched one lakh tonnes and with credit still being costly, there was no necessity for the rubber consumers to build up their inventories.

With the peak tapping season approaching, the consumers further had no reason to build stocks, thus giving indication of lower prices for the commodity, the sources said.

The rubber board has estimated that India would face a demand-supply gap of 2,000 tonnes only for natural rubber during 1997-98. The gap is estimated taking into account the mandatory stock reserve of 1.02 lakh tonnes, the two month consumption requirement in the country.

With a carry over stock of 1.05 lakh tonnes and a projected production of 5.85 lakh tonnes, besides an estimated import of 20,000 tonnes under advance and special licence, natural rubber supply was expected to be 7.1 lakh tonnes. The consumption was expected to be 6.1 lakh tonnes.

Meanwhile the countrie's natural rubber production has increased by 8.4 per cent during 1996-97 against an estimated production rise of 7.4 per cent, while the consumption went up by 6.9 per cent against a projection of 10 per cent increase, according to official sources.

Rubber production in the country during 1996-97 was 5.49 lakh tonnes against initial estimates of 5.42 lakh tonnes and consumption was only 5.61 tonnes against the anticipated 5.78 lakh tonnes, the sources said quoting the figures presented at the reconstituted Rubber Board meeting in Kottayam recently.

The production in 1996-97 was against that of 5.06 lakh tonnes in 1995-96, while the consumption was against 5.25 lakh tonnes during the same period. Actual consumption had gone down in view of the decline in the growth rate in the automobile tyre industry and slackening of demand.

In view of the increased production and decline in consumption, the mandatory carryover stock, which is the commodity's quantity consumed by the industry for two months, was 1.07 lakh tonnes, an excess of 13,310 tonnes. The sources said during 1996-97, the country imported 18,057 tonnes of natural rubber against the provisional figures of 17,000 tonnes, sources added.

This is against an import of 53,000 tonnes of the commodity during 1995-96, when there was a large demand-supply gap.

As per the figures, the monthly rubber consumption, after peaking to 49,360 tonnes in July last, declined steadily thereafter to register an offtake of 45,060 tonnes in October last.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.