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NR price: Tyre makers breathe easy

Continuing fall in Natural Rubber prices in international and domestic markets has indeed been bloating profit books of tyre companies, but has not helped non-tyre companies, mainly small and large units.

Today the Indian rubber industry’s turnover stands at around Rs 60,000 crore, out of which a larger chunk of Rs35,000 crore turnover is attributed to the tyre companies , while the rest Rs25, 000 crore comes from non-tyre sector.

Natural rubber, in last five years, has seen unprecedented volatility in prices, demand-supply and export-imports as well. Like the financial year 2013-14, the calendar year 2014 has also hurt rubber growers’ business.

“The year 2014 was a dismal year for commodities market and it was no different for natural rubber. Last year, natural rubber prices slumped to more than a five year low in the domestic as well as in the international market as supplies continued to outpace demand,” Anu V Pai, analyst at Geofin Comtrade, formerly known as Geojit Comtrade, told Polymers & Tyre Asia.

Production of natural rubber in the country declined by 14 per cent in 2014, year on year basis owing to unfavourable climate conditions especially during the monsoons and unattractive prices that discouraged growers from tapping actively. According to the Geofin analyst, for the FY 2014-15, India’s natural rubber production is seen declining 3.2 per cent to 750,000 tonnes. On other hand, consumption in year of 2014 rose over 5 per cent to 1,013,185 tonnes from 961,625 tonnes in the previous year, while imports of natural rubber surged to record level of 38,624 tonnes, a 29 per cent higher than natural rubber imported in the previous year.

“Tyre sector, which consumes the major chunk of natural rubber in the country, has been heavily relying on imported rubber. Wide difference between the prices prevailing in the domestic and international market, with Indian grade being on a premium, made imports more attractive. Decline in local natural rubber production too urged the consumers to opt for imports,” explains Anu V Pai.

For FY 2014-15, the Rubber Board expected consumption to rise by 3.4 per cent from a year earlier to 1.01 million tonnes, “The Board had estimated imports to be 360,000 tonnes, unchanged from the previous year, it is likely to surpass the forecast to touch new peaks,” she added.

By Sharad Matade

(Full Text in PTA Feb/March issue)

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