Natural Rubber Fetches over Rs 600 a Kg at Sri Lanka's Colombo Rubber Auction

07th January 2011, www.island.lk

High demand from India and China has ensured high rubber prices despite the global recession and with domestic demand picking up, the price of rubber expanded beyond Rs. 600 this week.

Weather in most rubber planting countries have not been conducive for tapping operations through out and production came down drastically during 2010 due to continuous rains. Meanwhile, due to the recession in Europe and USA, many rubber based industries shifted their operations to India and China, Damitha Perera, Director,Forbes & Walker Commodity Brokers (Pvt) Ltd said in a statement.

"The internal demand in both China and in India too was on the rise. Demand for cars in Asia grew ever than before during 2009/2010.

Sri Lanka too has a domestic consumption of well over 60% of its production, currently being one of the leading suppliers of Dipped products (Latex Gloves) and Solid Tyres to the world. As a result of all these reasons the current Rubber prices have reached the all time high price levels," Perera said.

At the public Auction dated 6th January 2011, Latex Crepe Ix reached Rs.605 whilst the price range for Latex Crepe No.01 was quoted between Rs.580 to 600 with an average Price of Rs.588 per kilo. Sheet Rubber (RSS) No.1 is currently selling over 560/- per kilo.

This upward trend may continue for some time as per industry experts, Forbes & Walker Commodity Brokers (Pvt.) Ltd said.

Sri Lanka saw the highest price for rubber ever to be recorded at the Colombo Rubber Auction last Thursday (6) held at the Ceylon Chamber of Commerce. It was a significant milestone as the price for Latex Crepe 1X reached the Rs 600.00 per Kg mark for the first time ever.

Shehan Meegama of John Keells PLC was able to make history when he obtained Rs 605.00 for a Latex Crepe 1X, manufactured by Eladuwa Estate managed by Namunukula Plantations Ltd. It was bought by Almar Trading Co. (Pvt) Ltd, one of the largest exporters of Rubber in Sri Lanka, a statement said.

Related Info:
• Sri Lanka Rubber Export Earnings Up on Increasing Demand from Emerging Markets

Rubber Prices Reach an All Time High at the Auction

30th March 2010, www.dailynews.lk

A kilogram of rubber fetched Rs 363.25 at the auction. Sri Lanka is the main exporter of rubber to many countries including China and India. They are the biggest manufacturers of tyres in the region.

There has been less rubber production as many of the countries faced a dry weather.

Even the largest rubber producer in the region, Thailand is also affected due to the prevailing dry weather, Colombo Rubber Traders Association Chairman M.S. Rahim said.

'Due to the dry weather, production dropped drastically.

There will be a drop in demand in the future if this weather continues. Most of the rubber manufacturing countries have faced the same situation, Rahim said.

He said last year out of the total rubber production in the country, over 60 percent was used for the local industry. The industry expands to a land extent of 122,000 hectares in the country.

The total exports of natural rubber in the country amounted to 55,990 metric tons last year.

Sri Lanka exports only white crepe rubber which has a good demand in the world market.

Sri Lanka Auctions Dollar-Rupee Swaps to Absorb Excess Domestic Currency Liquidity

03rd November 2009, www.lankabusinessonline.com

Sri Lanka's central bank has started auctions of dollar-rupee swaps to withdraw excess domestic currency liquidity in the market and develop a new instrument to intervene in the market, an official said.

Sri Lanka's Central Bank has steadily sold down its portfolio of government Treasury bills to absorb rupees generated from dollar purchases and then started selling its own securities.

"We are using an alternative instrument to absorb excess liquidity," deputy governor D Wijesinghe said.

"We have been steadily buying dollars from the market."

Bankers also had some issues with Central Bank securities as they cannot be used as security to borrow from the reverse repo window unlike government Treasuries, or used to back an intra-day liquidity facility in the real time gross settlement system.

Sri Lanka's central bank buys dollars to maintain a peg to the US dollar at around 114.90 rupees. The peg strengthened following a float in March 2008 which ended an expansionary cycle of liquidity injections and dollar sales.

Under an International Monetary Fund program plan the Central Bank is reversing the cycle through contractionary sterilizations to build up reserves.

Foreign reserves which fell to around a billion US dollars in March are now close to five billion US dollars, Central Bank governor Nivard Cabraal said last Thursday.

On Tuesday commercial banks had submitted bids of around 20 million US dollars for one-month swaps, in tranches of one to two million US dollars, dealers said.

The Central Bank will sell value-tomorrow dollars to the market and agree to buy them back in one month and return the dollars to market participants in a sell-buy swap.

The Central Bank will be able to 'earn' monthly dollar interest on the swapped foreign currency, while 'paying' the one month rupee rate for the rupees it generates through the swaps.

In a straight sterilization operation, the Central Bank has to bear the full rupee interest cost through Central Bank securities.

Dealers say the one month London Interbank Offered Rate is around 0.37 percent, but the Sri Lanka interbank dollar market is not active.

But banks have foreign currency banking units which actively solicit forex deposits and lends to qualified domestic borrowers, the government and foreign firms especially in the Maldives.

The first auction drew 64 million US dollars in bids Tuesday.

Dealers say the central bank would be able withdraw liquidity from the market at rates of slightly over 5.0 percent through the swap as opposed to about 8.0 percent through straight sales of Central Bank securities.