Natural rubber imports by India, the world’s third-biggest consumer, will surge to a record this year after monsoon rains cut production and as tiremakers increased purchases because of a decline in global costs.
Shipments will probably climb 38 percent to 300,000 metric tons in the 12 months through March from 217,364 tons a year earlier, said Rajiv Budhraja, director general of the Automotive Tyre Manufacturers Association. Imports jumped 53 percent to 264,576 tons from April to December from a year earlier, according to data from the state-run Rubber Board.
Purchases are rising for a fifth straight year as futures traded in Tokyo declined 16 percent in the past 12 months. Tire companies accelerated imports after prices dropped in producing countries such as Thailand, prompting the government to increase the tax on shipments last month to protect domestic growers.
“Imports are here to stay,” said Budhraja, who is a member of the Rubber Board. “The actual output is expected to be lower than the reported figure and this can be seen by the tightness in supply in the domestic market even though consumption hasn’t grown much.”
Production fell 10 percent to 627,000 tons in the nine months through December as consumption slid 2 percent to 728,080 tons, board data show. Heavy rains from July to September cut latex output, said Budhraja. The board predicted in May a 5.2 percent increase in output to 960,000 tons in the year through March and a 17 percent decline in imports to 180,000 tons.
Declining Prices
“In the next two quarters, tire companies will be able to maintain healthy margins because rubber prices have been declining,” said Surjit Singh Arora, an analyst with Prabhudas Lilladher Pvt. in Mumbai. “If the domestic rubber growers decide to hoard supplies as prices are falling and the cost of production is rising, then tire companies may once again buy more from overseas.”
The benchmark RSS-4 rubber in India fell 5.5 percent to 154 rupees ($2.50) a kilogram in the past year, according to the board. Futures in Tokyo traded at 253 yen a kilogram ($2,424 a ton) today. Prices in India averaged $2.8 per kilogram in the nine months through December versus $2.51 in Tokyo, according to data compiled by Bloomberg.
A slowdown in automobile sales in India may weaken demand for tires, said Arora. Passenger vehicle sales are set for the first annual drop in more than a decade, the Society of Indian Automobile Manufacturers said in September. The automobile market, which consumes 65 percent of the rubber, doubled in size from 2008 to 2011, according to Bloomberg Industries data.
Auto Slowdown
“In the next six to eight months, I do not see a meaningful recovery in the auto sector and the situation will continue to be grim,” said Arora. “The slowdown in demand will keep rubber prices subdued.”
The government should consider keeping a buffer reserve of at least 15 days to 20 days of supplies to avoid a shortage, Budhraja said. India buys rubber mainly from Thailand, Malaysia and Indonesia, and is the largest consumer of natural rubber after China and the U.S., according to the Association of Natural Rubber Producing Countries.
Despite the depressed demand scenario, the supply-demand gap continues,” said Budhraja. “Tire companies are importing because there is not enough supply to meet their requirement. If there was positive growth in the auto sector, then there would have been a situation of acute shortage.
Sourcea:- bloomberg.com
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