Anticipate short supply during peak production period

M.R. Subramani

At a glance

Imports to

begin arriving from April

Shipments into

the country almost nil in the last six months

Global prices

higher than domestic rates by Rs 6-7 a kg

New Delhi, March 10

Tyre manufacturers in the country will be importing 25,000 tonnes of natural rubber between April and September to overcome a perceived shortage. The imports come after a six months lull, when shipments into the country came to a halt.

"Tyre companies are importing basically since we anticipate shortage of rubber. Contracts have been signed and consignments will begin arriving from April onwards," said Mr D. Ravindran, Director-General, Automotive Tyre Manufacturers' Association, the apex body of tyre makers in the country.

The peak-tapping season is coming to an end and for the tyre companies the peak production season is set to begin.

During the peak production season, tapping would be on a low key what with monsoon setting in. "There is not much carryover stocks. Once production is in full swing, stocks could come down. We expect problems with supply," he said.

production growth

The tyre sector consumes 54 per cent of the total rubber produced in the country.

Last fiscal, production was 7.55 lakh tonnes, while this fiscal, it is estimated to touch 7.86 lakh tonnes. Imports last fiscal totalled 68,718 tonnes.

However, tyre makers feel the production growth of around five per cent may not match the consumption growth of 5.5 per cent.

Moreover, exports of rubber from the country have also reduced availability. Exports last fiscal were 46,619 tonnes, while during the current fiscal, exports till end of February were 61,000 tonnes, taking advantage of the wide price difference prevailing in Indian and international markets.

During the last six months, tyre companies did not import since global prices were higher than domestic prices," Mr Ravindran said. Even now, import prices would be higher but the tyre companies were more concerned about raw materials' availability.

"We will take stock of the situation in April. We will see how the prices behave and if necessary, we will import more," he said. However, traders are not buying this theory. According to Mr N Radhakrishnan of the Cochin Rubber Merchants' Association, it remains to be seen whether tyre companies could resort to costly imports.

Costly affair

"It will be really costly for them. They will be losing heavily because there would be a minimum price difference of Rs 6-7 a kg when they import," he said.

On the perceived shortage of raw material in the domestic market, Mr Radhakrishnan said although stocks by the end of this fiscal would be lower than that of last year, a carryover of 85,000 tonnes would not create a real bad supply situation.

"In the past we had a situation when stocks were only around 77,000 tonnes," he said.

Tyre production in the country is expected to rise by nine per cent this fiscal.

Currently, the ribbed smoked sheet (RSS) 4 is ruling at Rs 78.75 a kg, while its equivalent of RSS 3 in the global market is quoted at Rs 90.30 a kg. Natural rubber makes up 36 per cent of the average input costs for tyre.

Tyre companies import natural rubber duty-free under open general licence against export of tyres. They can import 44 tonnes of natural rubber for every 100 kg of tyre exported.

Though there are projections that rubber prices could top Rs 90 a kg in the next couple of months, currently only prices for June are showing a tendency to move towards that mark. On Friday, June contracts were quoted at Rs 86.45, down 35 paise from Thursday. June, usually, is the month when monsoon sets in and tapping is at low-key.

(with inputs from Vipin V. Nair, Kochi)

(This article was published in the Business Line print edition dated March 11, 2006)
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