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11. March 2006

INDIA: Tyre manufacturers to import 25,000 t rubber/Anticipate short supply during peak production period

Source: Daily "The Hindu Business Line", New Delhi; 11 Mar 2006

New Delhi , March 10
Tyre manufacturers in the country will be importing
25,000 tonnes of natural rubber between April and
September to overcome a perceived shortage. The
imports come after a six months lull, when shipments
into the country came to a halt.

"Tyre companies are importing basically since we
anticipate shortage of rubber. Contracts have been
signed and consignments will begin arriving from April
onwards," said Mr D. Ravindran, Director-General,
Automotive Tyre Manufacturers' Association, the apex
body of tyre makers in the country.

The peak-tapping season is coming to an end and for
the tyre companies the peak production season is set
to begin.

During the peak production season, tapping would be on
a low key what with monsoon setting in. "There is not
much carryover stocks. Once production is in full
swing, stocks could come down. We expect problems with
supply," he said.

production growth

The tyre sector consumes 54 per cent of the total
rubber produced in the country.

Last fiscal, production was 755,000 tonnes, while this
fiscal, it is estimated to touch 786,000 tonnes.
Imports last fiscal totalled 68,718 tonnes.

However, tyre makers feel the production growth of
around five per cent may not match the consumption
growth of 5.5 per cent.

Moreover, exports of rubber from the country have also
reduced availability. Exports last fiscal were 46,619
tonnes, while during the current fiscal, exports till
end of February were 61,000 tonnes, taking advantage
of the wide price difference prevailing in Indian and
international markets.

During the last six months, tyre companies did not
import since global prices were higher than domestic
prices," Mr Ravindran said. Even now, import prices
would be higher but the tyre companies were more
concerned about raw materials' availability.

"We will take stock of the situation in April. We will
see how the prices behave and if necessary, we will
import more," he said. However, traders are not buying
this theory. According to Mr N Radhakrishnan of the
Cochin Rubber Merchants' Association, it remains to be
seen whether tyre companies could resort to costly
imports.

Costly affair

"It will be really costly for them. They will be
losing heavily because there would be a minimum price
difference of Rs 6-7 a kg when they import," he said.

On the perceived shortage of raw material in the
domestic market, Mr Radhakrishnan said although stocks
by the end of this fiscal would be lower than that of
last year, a carryover of 85,000 tonnes would not
create a real bad supply situation.

"In the past we had a situation when stocks were only
around 77,000 tonnes," he said.

Tyre production in the country is expected to rise by
nine per cent this fiscal.

Currently, the ribbed smoked sheet (RSS) 4 is ruling
at Rs 78.75 a kg, while its equivalent of RSS 3 in the
global market is quoted at Rs 90.30 a kg. Natural
rubber makes up 36 per cent of the average input costs
for tyre.

Tyre companies import natural rubber duty-free under
open general licence against export of tyres. They can
import 44 tonnes of natural rubber for every 100 kg of
tyre exported.

Though there are projections that rubber prices could
top Rs 90 a kg in the next couple of months, currently
only prices for June are showing a tendency to move
towards that mark. On Friday, June contracts were
quoted at Rs 86.45, down 35 paise from Thursday. June,
usually, is the month when monsoon sets in and tapping
is at low-key.


(Syed Rashid Ali, Karachi, Pakistan)

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