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Wed, 22 April 2015 08:19:48
Sri Lanka rubber prices fall amid collapsing commodity bubble
13 Oct, 2008 11:03:35
Oct 13, 2008 (LBO) – A collapsing global commodity bubble, falling demand from industrialised countries and lower oil prices have caused Sri Lankan rubber prices to fall sharply in recent weeks, industry officials said.
One of the top grades of rubber, Thick Pale Crepe 1(TPC1), had fallen steeply to 220 rupees a kilo at last week's Colombo auction from 397 rupees a kilo in late June.

The island's natural rubber prices had shot up to record highs earlier this year, in line with the global commodities boom, as high oil prices sent up the price of synthetic rubber.

The boom meant super profits from regional plantations companies with grow rubber.

But natural rubber prices slumped as oil prices fell and demand is expected to fall further with the global financial crisis deepening, resulting in fears of an economic slowdown.

Economic analysts have predicted that both Sri Lanka's tea and rubber prices would fall once a bubble fired by money printing by reserve currency central bank burst with the 'sub-prime' credit bubble last year.

International coffee prices have already started to move down.

Amanda Weerasinghe, managing director of Almar Trading, a top rubber trader and exporter, said the financial crisis had weakened demand from industrialised countries.

This has resulted in lower demand for products like solid tyres made by the top rubber buyers in the island, Loadstar and Trelleborg who account for a big chunk of all rubber consumed locally.

"When suddenly the big boys are not taking their usual quota of rubber it has an adverse effect on the local market," Weerasinghe said. "So prices have slumped."

But although prices have slumped, the regional plantations companies are still making good money.

Weerasinghe said that although demand for natural rubber from emerging economies like China and India could sustain the market, it would take time for these countries to pick up the slack.

"True there's demand from China and India. But it would take quite a while for that demand to be felt in the local market. At the moment it all depends on the United States."

Weerasinghe said prices could fall further as more rubber becomes available with traders also holding big stocks.

"The cropping months are ahead of us," he said. "I'd be surprised if there's a dramatic turnaround in the market in the near future."

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