Rubber Imports by India to Rise on Shortage, Tiremakers Say.

Nov. 12 : Natural-rubber imports by India, the fourth-biggest producer, may climb at least 18 percent this year as excess rain lowers output and tire demand increases in Asia’s second-fastest growing market for cars.

Purchases in the year to March 31 may exceed 200,000 metric tons, from 170,048 tons a year earlier, Rajiv Budhraja, director general of the Automotive Tyre Manufacturers’ Association, a producers’ group, said in an interview yesterday.

Rubber prices in India, China, Indonesia and Thailand have reached records this year on concern that rain will limit output in Asia and worsen a shortage. Bridgestone Corp. and its Indian rivals including Apollo Tyres Ltd. and MRF Ltd. are investing $3 billion in plants to meet demand that’s forecast by the group to expand 10 percent to 106 million tires in the year to March 31.

“Imports will become the order of the day as tiremakers are faced with a difficult situation of tight availability and record prices,” said Budhraja. “There’s tremendous pressure.”

Passenger-vehicle sales in India in October increased 38 percent from a year ago to a record 231,957 units, the Society of Indian Automobile Manufacturers said on Nov. 10. About 1.4 million units were sold in the April-October period, from 1.53 million for all of last fiscal year, according to the society.

Natural-rubber output may drop for a second straight month, after falling 7.6 percent to 82,000 tons in October, as rains hinder tapping in Kerala, India’s top producer, said Budhraja. Imports surged 81 percent last month to 18,148 tons, according to the state-owned Rubber Board, as tire companies stepped up purchases to bridge the shortage, bolstering global prices.

‘Spoilsport’

“This is a rare situation where your own end-product is in demand and the raw material plays spoilsport in terms of prices and availability,” said Budhraja.

Rubber futures in Tokyo surged to a 30-year high of 383 yen per kilogram ($4,661 a ton) yesterday, the highest level for the most-active contract since February 1980. Indian prices climbed above 200 rupees a kilogram this week for the first time.

While global tiremakers including Bridgestone and Goodyear Tire & Rubber Co., are charging more, Apollo, India’s second- biggest by market value, yesterday reported a 59 percent slump in second-quarter group profit. Rubber accounts for 60 percent of its raw-material expenses, the company said in a statement.

‘Very Difficult’

“It’s been a very difficult six months managing the unprecedented rise in natural-rubber prices,” Chairman Onkar S. Kanwar said in the statement. While the company raised prices, “it is impossible to pass on a near 50 percent increase in the course of one year,” Kanwar said.

Apollo’s shares dropped 6.5 percent to 70.40 rupees, the most in more than 16 months.

Producers may increase prices by as much as 5 percent next month, the Business Standard reported on Nov. 10, citing Satish Sharma, chief of Indian operations at Apollo.

“It’s inevitable,” Budhraja said. “On the one hand, you have high prices and on the other, you are living hand-to-mouth in the peak-production season.”

Production in the April-October period rose 4.5 percent to 457,250 tons, while consumption rose 3 percent to 550,550 tons, according to the Rubber Board.

The board may soon reduce its annual output estimate of 896,000 tons, Joint Director G. Mohana Chandran said yesterday, without giving details.

Source : businessweek.com