Apollo and JK tyre companies are looking at buying natural rubber (NR) plantations in South-East Asia to decrease dependence on buying NR from the Kerala spot markets. The prices of this key raw material have been rising to new highs in the past couple of years, due to heavy demand and lower supply. Thailand, Indonesia and Malaysia are leading rubber producing countries.
Kerala is the leading producer in India, accounting for 92 per cent of the total production. Raghupati Singhania, vice-president and managing director of JK Tyre & Industries said, “Yes, JK Tyre is seriously considering buying rubber plantations in South-East Asia. Availability of plantation in India is rather difficult, hence it makes sense to look at alternatives. South-East Asian countries are mostly manufacturers or traders and hence buying land is cheaper there.”
On the issue of acquiring plantation assets overseas, Neeraj Kunwar, managing director of Apollo Tyres said, “As far as buying rubber plantations, or for that matter any kind of backward integration is concerned, we are always open to possibilities depending upon the need of the hour. Most importantly, a move like this needs to be a strategic fit with our business and long-term goals.”
In the past two years, NR prices have increased 198 per cent from Rs 7,217 a quintal on January 1 to Rs 21,550 a quintal on Monday, while rubber futures at the Tokyo Commodity Exchange have moved up by 217 per cent and have also affected the margins of the tyre companies.
“The reason tyre companies are looking outside India for buying property is mainly because these companies are looking at securing the availability of rubber. Also, availability of land is an issue in India,” said Rajiv Budhraja, director general, Automotive Tyre Manufacturers Association. Currently, tyre companies are procuring most of the natural rubber from domestic markets and the remaining is imported from South-East Asian countries. Buying NR plantations will only benefit the two companies as then spiralling costs will not affect their margins.
