Rubber imports into India are set to nearly double in the year to 31 March, compared with the year ended March 2012. In the 10 months till January, rubber imports touched about 360,000 tonnes, about 65% higher than the period under comparison.
In the last two years, imports have been rising because global rubber prices have been significantly lower than domestic prices. At present, the price of RSS Grade 4 equivalent in the domestic market is about 20% higher than that in the global market. Naturally, tyre makers for whom rubber comprises nearly two-thirds the total cost of production, would be better off importing rubber.
In fact, tyre firms have seen improved gross margin (revenue less raw material cost) in the last few quarters as a result of falling rubber prices.
Rubber prices in the international market have been falling on account of weak demand.
Globally, China, the world’s largest consumer of rubber for its tyre industry, started cutting back imports with the auto slowdown. The auto industry is still limping even in other countries in the developed world.
Meanwhile, reports suggest the fall in crude prices has led to tyre firms using a higher proportion of synthetic rubber in tyre production.
Demand is sluggish at home as well, with most large tyre makers operating at around three-fourths their capacity. To make matters worse, supply has been consistently high in the last couple of years on account of increase in rubber output and rise in acreage. Moreover, prices of rubber, like other commodities, follow global market trends.
The Indian government has taken steps to increase duty on dry, imported rubber to protect domestic plantations. Tyre makers, however, say imported rubber is likely to remain economically more viable than those sourced locally, given the global glut. The situation is unlikely to reverse in the near term unless there is an unprecedented surge in demand from the tyre segment, which accounts for nearly 70-80% of rubber used in the country.
– livemint.com
