With natural rubber prices witnessing a sharp spiral, the tyre industry is planning to import the commodity in a major way. Natural rubber prices have jumped 33 per cent in just five weeks. The gap between the global and domestic prices has widened as the current Indian price for the benchmark RSS-4 grade is higher by Rs 13-14 per kg than the global one. So, import is an attractive option for tyre majors to expand inventory in the light of an improvement in car and two-wheeler tyre sales.
According to the Automotive Tyre Manufacturers Association (ATMA), natural rubber prices are currently ruling around Rs 94 per kg from Rs 69 on March 1.
Globally, rubber prices are showing a stable trend, while Indian prices are appreciating by almost Rs 2-3 on a daily basis and may hit the Rs 100 level soon.
For instance, in Thailand, the largest producer of natural rubber in the world, prices moved up by only four per cent during March, from Rs 74 on March 1 to Rs 77 on March 31. In India, however, the rise was a whopping 23 per cent during the same period, from Rs 69 on March 1 to Rs 85 on March 31. Even the market experts are not in a position to put up a convincing reason for the current trend. The RSS-4 grade today quoted at Rs 94 in Kottayam, while the current global prices are ruling around Rs 80-81.
According to some experts, the absence of farmers in a daily appreciating market is the main reason for the present rally. Earlier, the growers waited for the prices to rise to Rs 80 from Rs 65 in last December. But when the prices breached the Rs 85 level, they waited for a price tag of Rs 90. A majority of growers are now holding their stocks, awaiting the prices to cross Rs 100. “Certain speculators in the futures segment are causing a huge distortion in the market and even the availability of natural rubber has become an issue. What is most unfortunate is that the rally in rubber prices is devoid of any fundamental shift in actual demand or supply situation,” said Rajiv Budhraja, Director General of ATMA.
The rise in circuit limit in natural rubber trading on commodity exchanges has also played a role. The circuit limit has been successively raised over the last few months and, currently, it stands at four per cent from two per cent earlier. ATMA has urged an immediate roll back of the circuit limit to two per cent.
Dealers said that the flow of the commodity to the terminal markets was too low, affecting bulk supplies to end users.
According to the Rubber Board estimates, as on February 28, the total stock in the market was 224,600 tonnes as against 198,000 tonnes in the same period in 2008. But even in this case of such a huge stock, it was very hard to mobilise 10,000 tonnes of rubber, they said. So, the availability of the commodity is a serious concern.
Another set of dealers have the opinion that a sudden spurt in demand by the tyre manufacturers has contributed much in the rally. Increasing sale of passenger cars has enthused the tyre manufacturing sector and major tyre companies are now trying earnestly to expand the inventory.
Till February, the total import was 73,53,0 tonne as against 82,11,6 tonne in the same period of 2007-08. In February 09, the import was 2,100 tonne and it is likely that there would be a sharp increase in imports in March and April.
Meanwhile, extreme summer heat has affected the yield of rubber trees. The production is expected to pick up by mid-May at the beginning of monsoon.
