Rubber Import Getting Costlier Due To High Prices.

KOCHI: The import of natural rubber by tyre manufacturers at a lower duty allowed by the Centre now looks like a costly affair because of a rise in global rubber prices. A lean season and the absence of internal demand are keeping the domestic rubber prices low.

The industry is yet to complete the import of 40,000 tonne of natural rubber allowed by the government at 7.5% duty. "We are waiting for some clarifications and approvals before proceeding further," said Rajiv Budhraja, director general of Automotive Tyre Manufacturers' Association.

But international prices have risen during the two weeks from the time of announcement. The prices have shot up from around Rs 211 per kg by Rs 5 now while domestic rubber prices have fallen by Rs 7 to Rs 207 per kg. The tyre industry is likely to wait for some time after getting the licences for executing the import.

Experts say global rubber prices may show a downward trend in the short term with a weak demand from China during the month and lower crude oil prices due to a deteriorating world economy. In fact, the industry had argued for the import of 1 lakh tonne without duty.

"If that was the case, the industry would have gone ahead with the import now. But now even with a reduced 7.5% duty, it doesn't look feasible. The notification was a big let-down," said Vinod Simon, president of All India Rubber Industries Association.

Meanwhile, internal demand for rubber has taken a hit with a drop in automobile sales and an increase in interest rates. "The offtake has gone down as the demand from over 1,000 factories has thinned," said N Radhakrishnan, former president of Cochin Rubber Merchants Association.

But this is expected to a temporary phenomenon. By September, car sales could pick up activating the demand for natural rubber. With the arrivals increasing in September, there could be pressure on the domestic prices. "But prices won't fall by a large margin as it could lead to hoarding by farmers," said George Valy, president of Rubber Dealers Association.

Source : economictimes.indiatimes.com