L.N. Revathy

Coonoor, Sept. 19

NATURAL rubber exports are likely to exceed the "incremental" target of 40,000 tonnes this fiscal despite the Centre phasing out financial incentives, according to the Rubber Board Chairman, Mr Sajen Peter.

"Though exports have caught on, it has not helped in reducing the excess

stock of rubber in the country, although it has been instrumental in maintaining the demand-supply balance despite the surge in imports," Mr Peter said, addressing the Commodities Outlook session at the United Planters' Association of Southern India on current trends in natural rubber.

"There has been a high degree of volatility in prices in the last three months both in the domestic and international markets. This is dissuading the exporters," he said. "Exports will have to emerge as an alternative marketing channel."

He said during 2004-05 rubber goods manufacturing units in the country imported 68,718 tonnes. Substantial exports also took place in the first quarter of the current fiscal as international prices were lower than domestic prices.

Exports had increased from 6,995 tonnes in 2001-02 to a record 75,905 tonnes in 2003-04. The country's share in rubber exports during 2003-04 was 1.3 per cent.

From July onwards, the gap between the domestic and global prices had widened to Rs 15 a kg. But, imports continue against contracts entered into earlier, according to him.

He said the rubber industry could not afford to be complacent. There was an imperative need for all segments to achieve efficiency in production and improve quality. Right product mix and appropriate marketing strategies assumed overriding importance, he said.

After a period of stagnation, the average productivity of rubber staged progressive improvements to reach 1,705 kg a hectare in 2004-05. It was expected to improve further to 1,745 kg a hectare in 2005-06.

"The improvement in productivity coupled with the anticipated expansion in tappable area by 7,000 hectares is expected to increase the production by 4.1 per cent to touch 7.80 lakh tonnes in 2005-06. Consumption has also swelled at an average annual rate of 4.6 per cent this year, compared to 3 per cent over the previous four years," Mr Peter said.

A noteworthy development during the regime free of quantitative restrictions has been that the country has emerged as an exporter of rubber - something unheard of until end-2000.

Meanwhile, global consumption of rubber in sharp contrast to production registered a growth of 7.3 per cent for the 12 months ending July 2005. The acceleration in consumption growth has been contributed by China and the US, where it grew by 17 and 10 per cent respectively, compared with the corresponding period of the previous year.

"Because of the hike in petroleum prices and the resultant gains made by butadiene contract prices, the relative share of rubber in the total elastomer demand increased to 42.1 per cent from 40.7 per cent during the same period a year ago," he said.

Global supply is anticipated to grow only marginally due to drought in the rubber plantations in Thailand and China.

The Association of Natural Rubber Producing Countries anticipates the global production for 2005 at 8 million tonnes. "This means, this year would end with a marginal deficit of 23,000 tonnes," he said.

While a further scope for short term improvement in production is limited and because of the rapid industrialisation drive taking place in Thailand and Malaysia, exports from these countries would see a decline in the next few years.

Thailand presently consumes 10 per cent of its indigenous production. Considering the huge requirement, serious supply shortages of rubber has not been ruled out.

According to IRSG's forecasts, by 2009, the global supply would be short of demand by 2.28 lakh tonnes and the medium term prices are expected to be stable.

(This article was published in the Business Line print edition dated September 20, 2005)
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