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M.R. Subramani

CHENNAI, April 2

AN unexpected 16 per cent rise in rubber consumption by tyre manufacturers leading to a sharp fall in stocks is seen as the prime force behind the commodity's price touching a seven-year high.

According to a note circulated by the Automotive Tyre Manufacturers' Association (ATMA) to its members, opening stock of rubber this fiscal is down to 1.17 lakh tonnes, far less than the 1.90 lakh tonnes stock carried over last fiscal.

``Stocks are down drastically as consumption by the tyre companies increased 16 per cent last fiscal,'' tyre industry sources told Business Line.

Consumption of rubber by the tyre companies were up last fiscal on three counts — first, due to movement of cement on increasing construction activities; two, the movement of steel and third, rising sales of automobile vehicles.

``Cement and steel had to move to interior areas which only road transport can do. That is one of the areas where rubber consumption by the tyre manufacturers went up,'' Mr D. Ravindran, Director-General, ATMA, said when contacted.

Tyre manufacturers alone account for nearly 50 per cent of the total consumption of natural rubber in the country.

The rise in consumption and consequent increase in demand has been reflected in the price movement of rubber. The price of RSS 4, primarily used by the tyre companies, rose to Rs 45,000 a tonne in March as against Rs 32,140 during the same period in 2002.

With peak production period for tyre manufacture coming up in May and June, rubber prices and stocks are seen under pressure.

``There is nothing that the Rubber Board can do about this. The only way for the industry to meet the emerging situation is to import,'' industry sources said.

Tyre manufacturers are likely to import around 30,000 tonnes by August. ``The imports will be made irrespective of whether global prices are higher or not,'' the sources said.

Currently, domestic prices are about Rs 2,000 a tonne higher than global prices. But the landing prices, including freight, customs duty and the Rubber Board cess, would be higher.

``Tyre companies will be importing because they do not want to join the mad scramble for stocks during May and June,'' the sources said.

Meanwhile, the Union Government has filed an appeal in the Supreme Court against the Mumbai High Court striking down the Directorate General of Foreign Trade notification disallowing tyre companies from importing rubber through advance licence scheme.

On the other hand, tyre companies are also planning to go to court challenging the Government's curbs on imports and mandatory inspection of imported consignments by the Rubber Board. Currently, rubber imports are allowed only through Visakhapatnam and Kolkata ports.

One of the tyre companies would be filing a case against both these orders of the Government in the Mumbai High Court. ``We are particularly affected by the mandatory checks carried out on imported consignments. We feel there is no need for such checks since Customs authorities are empowered to carry out random checks on all imported consignments,'' the sources said.

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