Due to a serious shortage of natural rubber (NR) in the domestic market, coupled with the widening gap between domestic and global prices, leading tyre companies are now opting to acquire rubber plantations in the major producing countries of Thailand, Cambodia and Vietnam. India’s leading tyre manufacturer, Apollo Tyres, has already acquired plantations in Laos. MRF and JK Tyres plan to follow.
The widening gap between the domestic and global prices and lower input costs in plantations abroad also attracts tyre majors to invest. For the last three months, the average Indian price of the benchmark RSS-4 grade is higher by Rs 20 a kg than the international price. This badly affects the profitability of tyre majors.
Apollo Tyres plans to acquire more NR plantations in southeast Asia to ensure availability of the raw material. NR comprises 50 per cent of the total cost of production of tyres. It already owns 10,000 hectares of plantations in Laos. The re-planting operations in Laos are in full swing and tapping of trees will commence in the next five-six years. Availability of rubber is the biggest concern at present. So, the company has outlayed a plan to procure 25 per cent of its total requirement from its own plantations in a few years to ensure regular supply. Apollo Tyres currently uses 16,000 tonnes of NR on an average every month. Apollo is the first Indian tyre company to acquire plantations abroad.
There is an annual shortage of 200,000 tonnes of rubber in India, being compensated by imports.
Tyre maker MRF is also looking to buy plantations abroad to tackle rising raw material costs, according to a senior company official. The company said it was looking at efficient ways to procure rubber, besides planning to acquire and manage rubber estates abroad. Today most of the rubber MRF procures is either bought domestically or through imports. Asked which countries the company was looking for acquiring the rubber estates, the official said they were looking at Thailand, Cambodia and Vietnam. He declined to give further details about the time period and size of the deal.
“We have plans to acquire plantations abroad,” said a top official from JK Tyres. He did not divulge details. Ceat Tyres, an RPG group company, also plans to own plantations abroad through its plantation arm, Harrisons Malayalam.
