With the gap between local and overseas prices widening, tyre manufacturers in India are importing natural rubber even during the peak domestic production season.
Traditionally, natural rubber imports into India drop during the October-March period, as domestic supplies increase during this period. A report carried by Reuters said natural rubber imports could reach a record high 22.5% of the country’s total consumption in the current financial year.
According to industry officials, natural rubber imports in the first half of the fiscal year (April-September 2012) increased by 23.5% year-on-year, and still tyre manufacturers are entering into new import deals.
“Tyre makers were actively signing import deals in September. Then the difference between local and overseas prices widened to over Rs45 (US$0.85) per kg,” the newswire quotes George Valy, President of the Indian Rubber Dealers’ Federation, as saying.
At present, India, the fourth-largest producer of natural rubber, imports rubber from Malaysia, Thailand and Indonesia. According to Valy, the country’s total imports could increase by 5.2% compared with the previous financial year, to exceed 225,000 tonnes.
The report says Indian tyre manufacturers are working to reduce their dependence on local suppliers of natural rubber. These supplies, they say, can be erratic, and influenced by farmers’ price expectations.
“Some farmers are not selling now, but they are continuing tapping. By mid-November this will lead to higher stocks. Then they will be forced to sell. They will also realise charging a very high premium over the world market is not possible,” Reuters quotes an unnamed dealer, based in Kochi, Kerala, as saying.
According to N Radhakrishnan, a dealer and former President of the Cochin Rubber Merchants Association: “The difference is very big. It makes imports viable even if there is a duty on imports. Tyre makers will continue imports in coming months.”
An unnamed senior official with a leading tyre manufacturer said his company is aiming for domestic-import ratio of 70:30. “A few years back it was difficult to think about importing 30% of requirements, but the way prices are moving in the local and world market, it seems feasible,” the official said.
Radhakrishnan, meanwhile, feels that an increase in rubber tapping, and increased imports, could result in higher supplies. This, he said, could depress prices during the October-December quarter, Reuters said.
