KOCHI, SEPTEMBER 6
The domestic rubber shortage due to the recent floods in Kerala is likely to perk up imports, which are likely to hit a record 5.3-5.5 lakh tonnes in FY 2019.
According to rating agency ICRA, rubber imports have accounted for 40 per cent of consumption in the last five years and the same is expected to reach 50 per cent in FY 2019 with the shortfall envisaged in output.
India is the second largest consumer of natural rubber (NR) after China. Despite India also being one of the key producers, contributing over 5 per cent of global output, it remains a net importer.
In FY 2018, India produced 6.9 lakh tonnes (lt) but consumed 11.1 lt, with the supply gap being fully met through imports from Indonesia, Thailand and Vietnam.
“We expect NR output to decline by 1.2-1.4 lt or 18-20 per cent fall in FY 2019. With rubber being a critical raw material, the sharp fall in output will have a consequent impact on the Indian tyre industry,” said K Srikumar, Vice-President, Corporate Sector ratings, ICRA.
As domestic rubber prices continue to increase on supply shortage concerns, tyre-makers continue to import rubber with the current landed costs lower than domestic prices.
However, with the expected rise in both domestic and global prices, coupled with the depreciation in the rupee, tyre manufacturers are likely to witness pressure on their margins. ICRA expects a 100-bps contraction in operating profit margins for FY2019, he added.
