As the demand-supply gap widens for natural rubber in India, tyre companies are increasingly resorting to imports to meet their requirement.
For example, Apollo Tyres has imported 45% of its net requirement. Even J K Tyre & Industries has imported close to 25% of its requirement.
Satish Sharma, chief, India Operations, Apollo Tyres Ltd said, “In the last fiscal, our natural rubber imports varied between 35 – 40% of the total requirement, whereas, in the first half of this fiscal, the imports have gone to 40 – 45%.”
While the consumption of natural rubber rose 5.6% in the first half of the current financial year, production rose only 1.1%. User industries, especially the tyre industry is resorting to imports owing to the supply crunch, which have risen to 1,12,640 tonne in the April-September period, against 91,186 tonne in the corresponding period last year.
A K Bajoria, president & director, J K Tyre & Industries Ltd said, “We are importing rubber from countries like Indonesia and Vietnam at present. In the last six months, we have imported around 25% of our requirement, and the proportion is the same right now. We will see how prices move.”
The Rubber Board has projected annual production at 9,30,000 tonne and consumption at 10,06,000 tonne, with an annual deficit of 76,000 tonne for the current financial year.
J K Tyre is on the lookout for small rubber plantations overseas to help with supply. “As far as acquisition is concerned, we are on the look out. The process is on, cannot comment on a time-frame when we will zero in on any asset”, Bajoria said.
The landed cost of imported rubber is around 3% cheaper compared to domestic rubber, he said, adding that the impact on margins, however, is around 0.5%.
Rubber comprises around 28-30% of the raw materials that go into making tyres, other ingredients being chemicals, carbon black, nylon fabric and crude oil etc.
Apollo’s Sharma, however, also pointed out that import of rubber has risen not only because of the demand-supply gap, but also because imported rubber is of superior quality.
“We are using imported rubber, which is superior in quality, for our radial tyres. And, the production of radials, both truck-bus and passenger car tyres, has gone up significantly this year”, he said.
The tyre industry in India has witnessed some sluggishness in the demand from original equipment manufacturers (OEMs). However, as tyre-makers are focussing on replacement market and exports, the impact of dull OE demand has been partially offset.
“Despite the sluggish demand from the OEs, our focus on the replacement market has resulted in steady sales throughout the first half of the fiscal”, Sharma said. Even Bajoria added that he expects the second half of the fiscal to be better compared to first half as demand is likely to pick up on account of the festive season.
Source: Business Standard
