Rubber auction prices hit all-time high

• Top latex crepe rubber prices hit Rs.1,000 per kilogram
• Rupee devaluation and weather conditions key contributors 
• Prices likely to remain at similar levels for coming weeks

Sri Lankan rubber prices have reached an all-time high, with top latex crepe rubber prices having hit Rs.1,000 per kilogram at the Colombo auctions this week. 

According to Forbes and Walker Commodity Brokers, the rupee devaluation against the US dollar has resulted in strong demand for all rubber grades. The analysis of the quotations of the Colombo auction report shows that the rubber prices have been on a steady increasing trend from January 2022. 

The price of top latex crepe that was Rs.650 in the beginning of the year (January 4, 2022) reached Rs.1,000 in the last auction held, which was on April 26. 

Speaking to Mirror Business, Forbes and Walker Commodity Brokers Director Damith Perera said several factors contributed to the increase in auction prices and a key contributor was the fluctuation of the weather patterns. 
The unfavourable weather conditions witnessed across the country from December had hampered the output. The production quantities were not at levels expected. Rubber plantations also witnessed an outbreak of a lead disease that was aggravated by the rains, which further contributed to a dip in output.

Further, the fluctuations in crude oil prices, which influence synthetic rubber prices, have also impacted the prices of natural rubber.

As of April 25, the OPEC basket stood at US $ 101.93 per barrel, compared to US $ 102.32 for Brent oil and US $ 98.54 for WTI oil.  The rubber prices at the Colombo auction are expected to remain at similar levels in the coming weeks, according to Perera. With the emergence of many opportunities in the marketplace for natural rubber, Sri Lanka is aiming to secure a much larger share in the global market. 

As the global demand for rubber-based products are expected to increase with the improvement of life quality and per capita income in the South American and African countries, Sri Lankan rubber industry expects an aggregate annual turnover of nearly US $ 4 billion by 2026.  The Association of Natural Rubber Producing Countries (ANRPC) in its latest report forecasted that the global natural rubber market should see marginal growth in both production and consumption this year.  Global consumption of the commodity is set for a 1.2 percent increase to 14.232 million tonnes, according to the report issued on March 17. 

Although a positive forecast, the association expects growth to be hindered, due to several challenges faced in the market.  On the supply side, the market is “heavily affected” by adverse climate as well as labour shortages in some producing countries, which are experiencing a rising spread of COVID-19. The ANRPC noted that the region is entering the “off-tapping season”, which may aggravate the supply tightness of raw material in the coming months. Meanwhile, on the consumption side, demand is driven by the healthcare sector and positive automotive growth in some major economies.