KOCHI: Rising international rubber prices may put tyre companies in a spot at a time when they are importing large quantities to tide over a severe shortage in the domestic market. Rubber futures prices rose to a two-month high on Tuesday on Tokyo Commodity Exchange with global spot prices looking up in anticipation of increased buying by China, the largest consumer.
Heavy rains in the last two months have led to a scarcity of natural rubber in the domestic market prompting tyre companies to go for more imports. Imported block rubber was cheaper despite the rupee’s slide against the dollar because the difference between the local price and the global price was as much as . 60. But the situation has changed in the last few days.
Prices of block rubber SMR 20 rose by Rs 12 from August 1 to Rs 147.38 per kg on Wednesday in global markets . In comparison, prices of sheet rubber RSS-4 in India have been steady at around . 194-195 per kg. “The natural rubber imports which were contracted earlier when prices were low are arriving now. This (shipments) will decline after September,” said Rajiv Budhraja , director general of Automotive Tyre Manufacturers Association .
His reasoning is that imports could turn costlier by then. Moreover , the industry expects domestic natural rubber supply situation to improve with increased tapping. Rubber Board figures show around 32% year-on-year fall in production in July to 46,000 tonne. In contrast, consumption in July fell by about 4% to 82,500 tonne. June had seen production plunge by nearly 39%. The tyre industry reckons that production in July could be further lower by around 4,000 tonne. Rubber Board had scaled down production figures by 16,000 tonne for June on getting additional information.
Imports for June and July have been higher compared to the same months of the previous year at 22,840 tonne and 29,311 tonne respectively . In August, imports are expected to be still higher. “Growers have begun tapping with rain guard as rains have eased. Improved production and imports could push down domestic prices by a few points in the coming days,” said a prominent dealer in Kottayam.
With vehicle sales slumping in the last several months, the tyre industry is hoping for some incentives from the government such as excise duty concessions, special interest rates and scrapping of commercial vehicles in use for 12 years. The inventory built-up for the festival season usually happens in August.
Source: India Times
