New Delhi: India’s natural rubber imports are set to climb to a record as a rebound in automobile sales boosts demand and domestic production slumps to a 17-year low.
Output may decline 5-7% in the year that began on 1 April, said Rajiv Budhraja, director general of the Automotive Tyre Manufacturers’ Association. That may increase purchases from overseas as car sales extend a rebound from the biggest drop in a decade.
The increase in imports to cover a domestic shortfall may help stem a decline in rubber prices nearing a bear market. The commodity is in the fifth year of glut after plantations across Southeast Asia went on an expansion spree from 2004 to 2011, according to the International Rubber Study Group.
“You have a situation where there is a drop in production and further increase in consumption, and that gap will only widen in the coming years,” Budhraja said in an interview on 30 July. “Imports will definitely exceed last year’s levels.”
Production was 645,000 tonnes in 2014-2015 and a 5% decline would trim harvest to 612,750 tonnes, the lowest since 1998-1999, according to data from state-owned Rubber Board.
Overseas purchases rose 5.5% to 106,294 tonnes in the quarter ended June, extending a 23% jump in shipments to a record 442,130 tonnes in 2014-2015, board data show. Consumption is seen at 1.06 million tonnes this year, the board estimates.
Crop switch
Benchmark rubber prices in Tokyo, which slid to a five-year low in October, are heading for a third straight year of declines. Futures for January delivery on Tokyo Commodity Exchange settled at 197.40 yen a kilogram on 3 August and dropped 20% since reaching this year’s peak of 247.9 yen in June.
The slump in prices is already forcing farmers in Kerala, the Indian state which produces 80% of the nation’s rubber, to switch to alternate crops, according to N. Radhakrishnan, adviser of Cochin Rubber Merchants Association.
Output is already down by 14% in the quarter ended 30 June, board data show. About 86,000 hectares of plantations will be left untapped this year because of low prices, according to Association of Natural Rubber Producing Countries.
The warm and dry weather caused by El Nino may curb latex production among growers including India in the coming months, Mayur Milak, a research analyst with Mumbai-based Anand Rathi Share and Stock Brokers Ltd, said in a report on 27 July. The global surplus will still reach 303,000 tonnes this year, more than the 77,000 tonnes predicted in January, according to the International Rubber Study Group, which predicts demand to grow at 1.2%, less than the 6.7% in 2014.
Demand for rubber in India is being fuelled by the nation’s automobile industry, which uses 66% of the output, Budhraja said. Car sales recovered in the year ended March after declining the most in a decade in the previous 12-month period. Sales will increase marginally this year, the Society of Indian Automobile Manufacturers (Siam) said last month.
Source : livemint.com