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Rubber is found in the fluid of some specific plants but it can also be produced synthetically. Synthetic rubber is produced through the process of polymerization of various monomers.

Naturally, rubber is produced by the process of tapping of the plant called Hevea Brasiliensis. The rubber tree is a native of the Amazon River basin in South America. The ideal rubber growing regions should be 8 degree North of Equator, 10 degree South of Equator, high temperature, altitude not beyond 400m and high humidity.

These plants generally have 32 years of economic life but they may live up to 100 years or even more than that. The plantation would start its yield from 6th year onwards. The natural rubber produced is processed to convert into a storable and marketable form.

The basic property of rubber is that it comes back to its original shape if it is twisted or stretched but if heat is applied to the rubber, it won’t return to its original shape easily.

The rubber industry produces wide range products like auto tyre, auto tubes, automobile parts, footwear, belts, cables & wires, battery boxes etc. Block rubber, Preserved Latex, Crepes and sheets are some forms in which rubber is produced and used.

India is the fourth largest producer of Natural Rubber, after Thailand, Indonesia and Malaysia.

Thailand is the world’s largest producer of natural rubber. It produced 2,970 in 2007. Indonesia is the second largest producer contributing around 29% of the world’s total natural rubber production. Malaysia produced 1,215 thousand tonnes and occupies the third rank in terms of production.

India is the fourth largest producer of natural rubber in the world. In the year 2007, India produced 810 thousand tonnes of natural rubber, down from 853 thousand tonnes in the previous year. India contributes 8% of the world natural rubber production.

Other major producers include Vietnam and China, contributing 6% each to the world production.

AREA UNDER RUBBER
IN MAIN PRODUCING COUNTRIES
(In Thousand Hectares)
Territory	End of	Total Area
Indonesia	2005	3,279.0
Thailand	2005	2,133.0
Malaysia	2005	1,250.0
China	2004	600.0
India	2006	615.0
Vietnam	2005	465.0
Brazil	2005	118.0
Sri Lanka	2003	128.9
Nigeria	1999	150.0
Liberia	1999	108.9
Myanmar	1995	104.8
Cote d'Ivoire	2005	118.0
Philippines	1999	92.0
Cameroon	2005	40.4

As mentioned earlier, Rubber plantations give yield only after 6 years of being planted and are productive for about 25 years. The above chart gives us an idea about the area under rubber in the main producing countries of the world. Indonesia, the second largest producer has 3,279 thousand hectares under rubber. While, Thailand which is the largest producer has 2,133 thousand hectares planted with rubber. This implies that Thailand has greater yield than Indonesia.

Malaysia and China have 1,250 and 600 thousand hectares under rubber respectively.

India has around 615 thousand hectares under rubber plantations. As per the Rubber Board, India now occupies the first rank in terms of productivity at 1,879 kg/ha.

China being the fastest growing economy of the world, is also the world’s largest natural rubber consuming country. At 2,534 thousand tonnes it consumes 27% of the rubber consumed world over. USA is the second largest consumer of rubber at 1,017 thousand tonnes, followed by Japan at 886 thousand tonnes.

India is the fourth largest consumer of natural rubber at 849 thousand tonnes. Other major consuming countries include Malaysia, Korea and Indonesia.

India’s natural rubber production has been increasing steadily over the past decade. The production grew at the rate of 10.50% in the year 2006, the highest in the past decade, but declined for the first time in 2007. India produced 810 thousand tonnes in 2007 compared to 853 thousand tonnes in 2006. Consumption too has been rising steadily. It grew at the rate of 3.3% in 2006 and 4.17% in 2007. Consumption grew from 517 thousand tonnes in 1995 to 8149 thousand tonnes in 2007.

The supply gap has improved from a deficit of 17 thousand tonnes to a surplus of 38 thousand tonnes. Again, the stocks available also depend on the import and export taking place. Production has grown at an average rate of around 5% per year during the past decade. Extremes of 0.48% and 1.42% were witnessed in 2001 and 2002, while 10.45% growth was seen in 2003. This is because when rubber trees are replanted, the new trees take a minimum of six to seven years to start giving latex. Thus this kind of decline in production can be expected for some years when replanting takes place.

The rubber growing regions in India can be classified under two major zones, traditional and non-traditional, on the basis of agro-climatic conditions.

Traditional Regions: Rubber cultivation in India has been traditionally confined to hinterlands of southwest coast, mainly in Kanyakumari district of Tamil Nadu and Kerala. Kerala and Tamil Nadu together constitute the traditional rubber growing regions in the country. Kerala alone contributes 92% of the total rubber produced in India and an area of 494,400 ha under rubber plantations. Tamil Nadu contributes another 3% of the total natural rubber production.

Non-Traditional Regions: These are hinterlands of coastal Karnataka, Goa, Konkan Region of Maharashtra, hinterlands of coastal Andhra Pradesh and Orissa, the northeastern states, Andaman and Nicobar Islands etc, where rubber is now being grown.

In recent years among non-traditional region, Tripura, has become one of the most thrust areas for Rubber growing because of its well acceptance worldwide. In fact, Tripura was declared the "Second Rubber Capital of India" by the Rubber Board. India has succeeded in Rubber cultivation due to research and extension work undertaken by the Rubber Board. The worldwide demand for natural rubber from Tripura is mainly because of its elasticity.

The North-Eastern region contributes up to 4% of the total production, while Karnataka contributes 2%. An area of 64,883 ha is covered by rubber plantations in the north-eastern region.

As a result of removal of quantitative restrictions on NR import with effect from 1st April 2001, 49,769 tonnes of NR was imported during 2001-02. During 2002-03 the import declined to 26,217 MT mainly due to unattractive price margin. Imports in 2003-04 again surged to 44,199 tonnes. An important development in Government Policy towards import of NR that took place during that year was the removal of the ban on import under Advance License Scheme. Government restored the facility for duty free import of NR in July 2003 and further from 8th January 2004 reduced the basic customs duty on NR from 25% to 20% and abolished the Special Additional Duty (SAD) of 4%. Further, the port restriction on import of NR imposed in December 2001 was lifted by the Govt. of India on 6th August 2004. The return of Advance license, removal of port restriction and above all the domestic price ruled above the international market price are the major factors for the further record rise in import of NR during 2004-05 of 68,718 MT. Further, the imports during 2005-06 declined to 45,285 MT with production growth rate increasing to almost 10.5% and consumption growing by only 3.3%.

During 2006-07 a large quantity of Rubber was imported. 89,699 MT of natural rubber were imported by the user industry as the domestic prices had risen above the international prices. The auto tyre manufacturing industry is the main consumer of natural rubber.

India imports Natural Rubber on a regular basis from Malaysia since 1980-81. During 1984-85 to 1988-89 India’s share of Natural Rubber Import from Malaysia was approximately 82% of total imports. But from the year 2000-01 to 2003-04 shares of imports from Malaysia has slipped down to the ranges 15% to 33% of the total imported value of the year. In recent years, since 1992-93 Imports from Thailand is gradually taking place and rising (approximately 43%-47%). In 2006-07 India has imported more from Indonesia (44%) than Thailand (34%). Besides these countries, India imports Natural Rubber from Singapore and Sri Lanka on regular basis.

Total imports during 2006-07 have risen drastically. Major imports during 2006-07 were from Indonesia, Thailand, Sri Lanka and Malaysia

Export of Indian NR, which was little known in the overseas market until 2001-02, managed to get a break in the highly competitive global NR market. Export of natural rubber from India rose from the low level of 6,995 tonnes in 2001-02 to 55,311 tonnes during 2002-03 and 75,905 tonnes during 2003-04. But in 2004-05 export partially slide to 46,169 MT and the decrease in the quantity of export of NR was due to the reduced rate of incentive and lesser price difference in the domestic and international market. In 2005-06 exports regained their lost ground rising to 73,830 MT.

56,545 MT of natural rubber were exported during 2006-07, down from the previous year as the Indian prices were high compared to the prices in international market. Moreover, the appreciation of rupee during the year added hindrance in the exports.

A major change in the NR trade during 2005 has been the introduction of VAT in most of the rubber centers particularly Kerala, the state which accounts for 92 per cent of the production. VAT has had an impact in both exports as well as domestic trade.

Though India’s relative share in the total world merchandise exports remains at 0.8 percent, the country’s share in NR exports during 2003-04 was 1.3 per cent. Against a target of 102,000 tonnes during the tenth plan, the total export during the first three years of the plan was 177,385 tonnes.

According to Mr.Sajen Peter, I.A.S., Chairman, Rubber Board, export promotion measures such as identifying and encouraging potential exporters and overseas buyers, promoting buyers-sellers interaction through website and participation in international trade fairs are continuing.

Export of NR during the crucial period has not only helped to reduce the excess stock of NR in the country, but also has been instrumental in maintaining the demand-supply balance in spite of surge in imports.

The main factors contributing to the buoyancy in export were the export promotional measures adopted by the Government of India and the prevalence of relatively higher NR prices in the international market since June 2003.

As per the country-wise export information of Natural Rubber during 2004-05, the leading export market of Indian Natural rubber are China, Malaysia, Indonesia, Malaysia, Turkey, Sri Lanka, Spain, Pakistan, Singapore and Nepal. Historical data shows that Natural Rubber export from India maintains a regular trend to Nepal, i.e. its share was 93% in 1995-96 and gradually slides to 81% in the year 1998-99; around 10% in 2001-02 and presently Nepal’s share in natural rubber export remains 2.5% to 3%. After 1998-99 Singapore entered as a targeted export market zone for India with 64% export share in the year 1999-00, and in the next year (2000-01) its share in India’s natural rubber export was 17%, because that year India’s export spurted with additional two potential export zone of natural rubber as Indonesia with 30% and Pakistan with 21%. Indonesia was the third leading export market up to 2002-03 with 16.5% share. Malaysia and China both entered in India’s natural rubber export market with a very silent note (having only 162 MT export demand) in 1999-00 and 2000-01 respectively.

The fastest growing economy in the world, China, remained the leading export market for India. Though the total exports declined in 2004-05, China’s share remained the highest at 35% of total exports in 2004-05, Sri Lanka next at around 22%. Malaysia, Singapore, Nepal, Spain are the other potential markets were further exports may be encouraged.

Exports in 2006-07 shot up and included exports to countries like Vietnam, Belgium, and Germany apart from Sri Lanka and Turkey. China’s share dropped to 29%, while 18% of the total exports were made to Malaysia.

After the opening up of the Indian economy in 1990s, India’s domestic rubber market started showing links to the international market. Probable determinants of volatility in natural rubber prices in domestic market are state administered procurement programs, inconsistent import and export policies and global market trend.

The period from 1994 to 1998 was the most turbulent in domestic price trend of natural rubber. In June 1995 RSS-4 price shot up sharply to Rs.6,171 per quintal from Rs.2,599 a quintal in March 1995. The probable reason of this sudden price hike was decline in world production of natural rubber in main producing countries. Immediately after May 1995 India’s import of Natural rubber also increased. The maximum natural rubber import during 1991-92 to 2003-04 took place that year i.e. 51,635 MT. Simultaneously in global market natural rubber price rose in anticipation of future supply tightness and shortage of some grades, because Australia forecasted to decline NR production due to serious drought.

After that in February 1999, Indian Government banned rubber imports through ALS (Advance License scheme), as a result of this rubber prices moved sideways. The removal of the quantitative restrictions from 1st April 2001 aggravated the declining price trends. The probable reason behind this firming up of Natural Rubber prices are up trend in global market, global natural rubber supply fails to catch up with growing demand-particularly from China.

Demand for Rubber is most evenly distributed over the years but due to absence of production in monsoon, supply shrinkage occurs.

By June / July the production becomes normal, but lingering rains last for a couple of months. During rains tapping of rubber trees disrupted and production falls. Resultantly prices would rise at that time, unless there is an acute economic depression or similar negative factors.

Futures trading in Rubber flagged off on 15 March 2003 for the very first time in India via National Multi Commodity Exchange of India Ltd. Ahmedabad, and the product soon became a role model as a truly efficient and liquid market. If futures are meant for the real hedgers, rubber futures should be considered as a great success. NMCE has provided an unbiased credible online platform to all the participants giving equal opportunities of the fair and transparent trade. Rubber futures have been used by the rubber industry which is largely located in the south. It includes the traders, exporters, user industry, manufacturers, etc.

NMCE has CWC warehouses at Kottayam, Aluva, Ernakulam, Kakkanad, Kakkanchery, Kozhikode, Trichur, Palakkadu, etc in south were Rubber is stored.

NMCE has facilitated a delivery of 49,753 tons of rubber up to April 2008 since its inception.

After a detailed cost study by the Costing Branch of Finance Ministry, in 1998 GoI announced Rs 35 a Kg, to a large extent, as the benchmark price.

But rubber historical prices show that 1998-99 to May 2002 price of RSS 4 remained lower than Rs.3,500 per quintal. Since rubber futures trading started in India, it has never gone below this scale, and also absurd volatility in its prices has now become unusual. This gives a very relevant example of market participation by the actual rubber growers who are now benefited by the futures trading mechanism and have consistently managed to gain a price that is approximately 94% higher than the cost price of rubber. The rubber growers of Kerala have heaved a sigh of relief, by getting consistently good prices due to the efficient price discovery and price dissemination contributed by futures trading on the NMCE.

The futures price perfectly converges with the spot price every month on the date of settlement as it ideally should. A recent example of the same can be viewed in the chart below displaying the June 2007 Rubber futures and spot price. As the expiry date of the contract approaches, the spread between the two declines and on the last day it becomes zero, settling at Rs.8,194 per quintal.

Thus, users and growers alike can take advantage of the prices on the exchange by taking a position in the future contract.

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