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Natural rubbers import have crossed 100,000 tonnes in just four months in the current financial year. According to the latest data of the Rubber Board, during the April-July period 133,789 tonnes were brought into the country. This was 90,580 tonnes in the same period of FY14. The lower price regime in the overseas markets is the main reason behind this sharp increase. Experts said that import may cross 300,000 tonnes when the financial year closes. The Union government has expressed that duty on import would not be hiked in the light of fall in prices in the local markets. In July, the imports were 36,997 tonnes.
Imports are likely to be much higher this year as overseas prices have been more 'comfortable' to the Indian tyre majors, compared to local prices. The fresh 'enthusiasm' in auto market may also push ahead the demand for natural rubber. The price in Bangkok market dropped to Rs 119 kg for RSS-4 grade, while the local price is Rs 138/Kg. Experts said that the fresh enthusiasm in the automobile market, especially in the sale of cars will make the tyre companies more 'vibrant' as demand in OE segment is on the rise. According to sources 5-7% jump was reported in the sale in OE segment during April-June period of the current financial year. Neeraj Kanwar, vice chairman and managing director of Apollo Tyres said that there are signals of improvement in tyre industry and more investment is likely in the future. The company will invest roughly Rs 2000 crore for the capacity expansion of Chennai and Kalamassery [Kerala] facilities in next 2-3 years. It also planns to set up a green field facilityin Eastern Europe with and investment of Euro 500 million. These initiatives will attract more imports in the next few years.
The much higher local market is also attracting more imports to the country, according to experts.
Most of the companies prefer to import Standard Malaysian Rubber [SMR], which is almost equal to the most favored RSS-4 grade in India, but is much cheaper in the overseas markets. Today this is quoted at Rs 102. The price once dropped even below the Rs 100 mark. According to experts, the global rubber market is expected to remain in surplus for another threeyears causing gluts of roughly 652,000 tonnes, 483,000 tonnes and 316,000 tonnes in 2014, 2015 and 2016, respectively. Additionally, China is expected to register a gross domestic product growth rate of 7.5% in 2014, which is the lowest since 2002. This slowdown means a slowdown in rubber demand also - as China is the world's biggest rubber consumer- hence casting a shadow on the price. Wall Street Journal, an American financial newspaper, recently reported that Thailand, the world's largest natural rubber producer, would start unloading rubber stock pile estimated at 220,000 tonnes, leading to further pressure on prices. The article also said that the stockpiles in major rubber consumers like China and Japan were also at high levels. Hence the global market parameters indicate a lower price regime in the rubber mart.
Apollo, MRF and Ceat are among companies increasing imports as futures in Tokyo are trading at a five-year low. Prices have slumped 63% from a record high in 2011 and may extend losses as a global glut stretches into a fourth year. Tyre makers are benefiting from cheaper imports, helping them offset risingcosts of raw materials made from crude oil. Earlier the price of RSS-4 grade even touched Rs 245/kg, and the price of tyres was increased sharply by 10-15% at different strokes, but the companies are reluctant to reduce the prices even though rubber prices dropped heavily. Neeraj said that price cut would not be possible as huge investment is needed for consolidating position in the market. According to sources, the companies are unwilling to reduce the prices as the cost of other raw materials like synthetic rubber, Nylon tyre cords, carbon black etc increased sharply. 'We can only offset the losses happened in the past. Mere drop in the rubber price will not have much effect of the profitabllity of the companies," said a tyre companytopofficial.
Production up 15%
Meanwhile, during the April-July period domestic production increased 15.3% at 226,000 tonnes as against 196,000 tonnes in the same period of last year. 28.3% rise was reported during July, Rubber Board said. The abnormally high rate of increase has to be viewed with reference to the 32.4% fall in supply during the same month in theprevious year, when tapping was interrupted by continuous monsoon. The consumption of NR during April-June increased by 2.9% to 339,000 tonnes compared to 329,460 tonnes.
