Natural rubber imports by India, the world’s third-largest consumer, will probably climb to a record as production trails demand and automobile sales rebound on tax cuts, according to the nation’s Rubber Board.
Shipments are set to jump to 300,000 metric tons in the financial year ending March 31, surging at least 38 percent from 217,364 tons a year earlier, Sheela Thomas, chairman of the board, said in an interview at an industry conference in the southern city of Kochi today. Imports may drop to 200,000 tons in 2014-2015 because of rising output and an increase in the import tax, she said.
India, the third-largest economy in Asia, cut the excise duty on small cars and sports utility vehicles this week to reverse a slowdown in sales amid the slowest growth in a decade. Tire makers including MRF Ltd. (MRF), Apollo Tyres Ltd. (APTY) and Ceat Ltd. (CEAT) boosted shipments to benefit from a bear market in rubber, prompting the government to increase the import tax in December.
“The auto industry has shown a marginal recovery in the last quarter of 2013 and with the excise duty cut announced, we hope it may improve further,” said Thomas. “The replacement tire sector will be the key driver for consumption.”
Finance Minister Palaniappan Chidambaram on Feb. 17 cut the excise duty on small cars to 8 percent from 12 percent and on SUVs to 24 percent from 30 percent. Rubber imports jumped 41 percent to 279,627 tons between April and January from a year earlier, according to data from the state-run board. The import estimate for 2014-2015 is subject to revision, Thomas said.
Production Curb
“Huge amount of imports are still coming in and imports in the next fiscal year may be similar to this year’s level,” said Santosh Kumar, vice president for rubber at Harrisons Malayalam Ltd. (HRM) “India is getting stuck because of its production constraints and will need to import rubber.”
Futures on the Tokyo Commodity Exchange, the international benchmark price, will drop as much as 15 percent to 200 yen a kilogram ($1,956 a ton) in 2014 from yesterday’s settlement, according to the median of 15 estimates compiled by Bloomberg. That’s 63 percent below the record high set in 2011. The contract for delivery in July traded at 227.50 yen today.
The consumption will climb 4.1 percent to 1.01 million tons in 2014-2015 from this year driven by tire replacement demand, said Thomas. The nation’s automobile market, which consumes 65 percent of the rubber, doubled in size from 2008 to 2011, according to Bloomberg Industries data. The country imports mainly from Thailand, Malaysia and Indonesia.
Production may increase 12 percent to 950,000 tons if the weather remains normal and more trees begin producing latex, said Thomas. Heavy monsoon rains in July and August last year disrupted tapping and led to some pest attacks, cutting output this year, she said. Production fell 9 percent to 723,000 tons in the 10 months through January, while consumption slid 1 percent to 811,110 tons, board data show.
Source:- businessweek.com
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