India, the fourth-biggest producer of natural rubber, may allow imports of as much as 100,000 tonnes at a lower duty to meet surging demand for tires as rising incomes boost car sales, Trade Secretary Rahul Khullar said.
The finance ministry may make a decision after the end of the current session of parliament which runs to December 13, Khullar said in an interview in New Delhi yesterday. The trade ministry has recommended imports at a concessional rate for a maximum of 100,000 tons and tax changes on tire imports, he said, declining to elaborate. Rubber imports are taxed at 20 per cent.
Rising incomes in the world’s second-most populous nation may help more than double annual car sales to 3 million by 2015, according to the government, boosting demand for natural rubber. Prices in India reached a record last month on concern that the low-output season in Southeast Asia will worsen a deficit.
“Domestic production is not going to increase dramatically, demand is going through the roof because factories are being set up to make radial tires,” Khullar said.
“The pressure on prices will continue tight through next year, until you resolve the availability issue.”
Bridgestone Corp and its Indian rivals including Apollo Tyres and MRF are investing $3 billion in plants to meet demand that’s forecast by Automotive Tyre Manufacturers’ Association to expand 10 per cent to 106 million tires in the year to March 31. Rubber makes up 42 per cent of raw material costs, according to the manufacturers’ group.
Stocks rally
Tire makers’ shares jumped in Mumbai trading. Apollo gained as much as 2.7 per cent to Rs 67.9, after losing 7.7 per cent last month. JK Tyre & Industries added as much as 3 per cent to Rs 149.4 and MRF climbed 3 per cent to Rs 8,100.
Futures on the Tokyo Commodity Exchange reached a 30-year high of 383 yen on November 11 as rain in Thailand, Indonesia and Malaysia, the top three growers, interrupted tapping and lowered production. May-delivery rubber on the Tokyo Commodity Exchange gained as much as 1 per cent to 363.8 yen a kg ($4,351 a ton) before settling at 363.5 yen.
Passenger-vehicle sales in India in October increased 38 per cent from a year ago to a record 231,957 units, the Society of Indian Automobile Manufacturers said on November 10. About 1.4 million units were sold in the April-October period, compared with 1.53 million for the whole of the last financial year, according to the group.
“Demand-supply gap has been widening over the past two to three years because of stagnant rubber production and rising car sales,” said Vaishali Jajoo, an analyst with Mumbai-based Angel Broking. “There will be imports in the coming years if there’s no fresh supply and the auto sector continues to do well.”
She has a “accumulate” rating on Apollo and a “buy” recommendation on JK Tyre.
Imports in the year to March 31 may exceed 200,000 tons, from 170,048 tonnes a year earlier, tire makers association’s Director General Rajiv Budhraja said on November 11. Natural-rubber output may drop for a second straight month in November after falling 7.6 per cent to 82,000 tonnes in October, as rains hinder tapping in Kerala, India’s top producer, he said.
Purchases surged 81 per cent in October to 18,148 tonnes, according to the state-run Rubber Board, as tire companies stepped up purchases to bridge the shortage.
