Tyre sector skids over steep rubber prices, lower imports.

KOCHI: Rising rubber prices in India and abroad have left automobile tyre manufacturers, who are adding huge capacities, with fewer options. While domestic supplies have remained expensive, imports are likely to be far lower than the previous year’s level.

International rubber prices have to be at least 20% lower than the local prices for tyre companies to opt for duty-paid import of natural rubber. However, international prices have remained higher than the domestic prices in the recent past.

India has emerged as the second largest consumer of rubber with rubber consumption declining in US. The consumption in India stood at 9.31 lakh tonnes last year. While total import stood at 1.71 lakh tonnes last year, the Rubber Board has projected 70,000 tonnes of imports for this year. One reason for this could be the possibility of lower duty-free imports under advance licence. “Tyre exports fell by 5% last year. The lower exports would reduce the imports under advance licence, especially since the industry imported a huge quantity last year,” an official of Rubber Board said.

Mr Rajiv Budhraja, director general, Automotive Tyre Manufacturers Association, told ET around 11,000 tonnes have been imported into the country till May this year. “Bulk of this import is technically-specified rubber because the price differential with the comparable Indian standard natural rubber (ISNR) was favourable for imports,” he said.

Tyre companies require 75,000-80,000 tonnes of natural rubber a month. The deficit in the country last year was close to 1 lakh tonnes and the deficit has been estimated at around 85,000 tonnes this year. According to Mr Budhraja, “tyre companies are concerned about the availability of rubber in the medium term.” He said that countries like China, which are competing with us, are increasing acreage under rubber and at the same time ensuring international supplies. As compared to this, the production plans for North East region have not achieved targets, he pointed out.

With the tyre industry adding huge capacities, the overall availability of natural rubber is a cause for concern. Even for duty-free imports of rubber to be economically feasible, international prices have to be lower by Rs 4-4.50 per kg. The sector is now seeking customs duty reduction for rubber.

Source : The Economic Times