Natural rubber prices fell by almost a fourth for the RSS-4 grade from around ₹170 per kg at the beginning of 2022 to below ₹140 towards the end of the year. Poor demand from China, the largest consumer of natural rubber, and the slowdown in Europe are said to be the reasons behind the slump, while the outlook for the new year remains muted on the rising geopolitical uncertainties.

The latex sector suffered the worst, as the downward correction of prices came on the back of sustained buoyancy enjoyed during Covid times. The sudden surge in demand for gloves in the pandemic period had boosted the requirement of latex, whose prices spiked in 2021. However, the drop in demand led to the price crash from ₹130 in January to ₹90 per kg by December.

Ramesh Kejriwal, President, All India Rubber Industries Association (AIRIA), said falling prices come as a double whammy to the rubber sector, which is already plagued by an unprecedented rise in input costs. A major portion of plantations are due for replanting and if no action is coming at this point, this will only exacerbate the situation.

India produces 7 lakh tonnes of NR against the requirement of 12.50 tonnes. He said there is a need to expand cultivation in more traditional and non-traditional areas to meet the requirement of 15 lakh tonne by 2025-26. This is expected to fulfil both the domestic demand and reduce the dependence on imports, he said. 

AIRIA had submitted a memorandum to the Commerce Ministry, saying that the import of natural rubber attracted 25 per cent duty, while it was only 10 per cent for compounded rubber. Compound forms of rubber contained almost 90 per cent of natural rubber. The government has been requested that the present situation calls for restricting NR imports for a minimum period of two years, by changing the policy condition from free to restricted, as was done recently for import of tyres.

The domestic tyre industry is currently having an ample inventory, especially in the form of block rubber imported from the Ivory Coast and compounded rubber from the Far East, he added.

Muted prospects

Sarath S Pillai, Director, Acumen Capital Market (I) Ltd, said the industrial demand for NR is likely to be muted next year as global economic growth is likely to be affected in 2023 due to tight monetary policies by central banks led by the US Fed. The recovery of the Chinese economy is still unclear as the country is grappling with surging Covid cases.

KN Raghavan, Executive Director, Rubber Board, said that the resumption of large scale planting of rubber in the North-East was a significant measure taken to boost production on 200,000 hectares with the support of tyre industry. The project got under way in a modest manner in 2021 and it picked up full steam in 2022. The target for planting in 2023 is 50,000 hectares and preparatory work in this regard has started, he said.

Another genetically modified plant developed by Rubber Research Institute of India is ready for of confined field trials. Two new areas currently being explored by Rubber Board for providing additional income to farmers are carbon credits and sustainability certification of rubber plantations. The possibility of making available carbon credits for rubber plantations under voluntary carbon exchange is being studied, he added.

The global NR demand is forecast to slow down to 2.8 per cent in 2023, following a sharp recovery between 2021 and 2022.

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