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Friday, May 31, 2002

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Industry & Economy - Tyres

Sharp rise in domestic prices -- Tyre makers seen importing rubber

M.R. Subramani


RUBBER-consuming industries, particularly tyre makers, are likely to import natural rubber if the prices go beyond Rs 3,800 a quintal.

"If the prices are to rule at Rs 38-40 (for RSS-4) a kg, they would be abnormally higher. We do not think that is the right price, considering the current global trend. Therefore, we may be forced to import," sources told Business Line.

During the last two weeks, the price for RSS-4 (ribbed smoked sheet) has been hovering between Rs 36 and Rs 37.25 a kg. On Thursday, it was quoted at Rs 37.50

In contrast, the global price for RSS-3, which is equivalent to RSS-4 in the domestic market, is ruling at around Rs 3,475 a quintal. "If the prices rule higher, we might import 20,000 tonnes during June and July," the sources said.

Domestic rubber prices are up on rains in Kerala, which have affected tapping, and low arrivals. On the other hand, with April-June being the peak production period, the demand is high.

"The current prices do not reflect the real position in the market," the sources said.

Grower sources are of the view that the prices will rule around Rs 34 a kg and further decline is unlikely.

"We can't allow the prices to go up. At least, to check the prices, imports are required," trade sources said.

Rubber prices have been on the upswing since March after they fell to a seven-year-low last year. A slew of initiatives, including the fixing of minimum statutory price (MSP) launched by the Government has helped the upward trend.

The Government has also gone all out to promote exports, while imposing non-tariff curbs on imports such as allowing it through Visakhapatnam and Kolkata ports only. It has also refused to allow imports through advance licensing scheme (ALS), which is allowed against export of goods.

Despite these curbs, imports during 2001-02 fiscal were a record 45,000 tonnes. The imports began only around August after the Government fixed the MSP and shut the ALS route. The Government fixed an MSP of Rs 32.09 for RSS-4 and 30.79 for RSS-5. It also came up with subsidy for exports, which resulted in the Kerala State Rubber Cooperative Ltd (Rubco) and the Rubber Marketing Federation (Rubbermark) winning orders to ship around 30,000 tonnes.

Rubber prices have been on the wane since 1999 on a slump in the transport sector and economic slowdown, the mainstay of rubber consumption.

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