India, the third biggest consumer of natural rubber in the world is heading to a record increase in excess of ten percent this year, thanks to the humungous car sales and the resultant burgeoning demand for the ingredient used in tyre manufacturing.
India, the third biggest consumer of natural rubber in the world is heading to a record increase in excess of ten percent this year, thanks to the humungous car sales and the resultant burgeoning demand for the ingredient used in tyre manufacturing, according to a Bloomberg report.
The report further says that the consumption of natural rubber might as well increase to around 225,000 metric tonnes in the financial year that began on April 1, 2012 in contrast to 205,050 tonnes consumed in the year ago period, quoting Rajiv Budhraja, Director General of Automotive Tyre Manufacturers’ Association of India as saying.
Increased car sales in India should help futures in Tokyo extend a 16 percent rally in 2012 and rising costs for tyre manufacturers including MRF and Apollo Tyres. According to the estimate of industrial body, The Society of Indian Automobile Manufacturers, the passenger car sales will show an upward tick between 10-12 percent this fiscal, extending record monthly sales in January, February and March 2012.
Budhraja pointed out: “The growth of Indian tyre consumption this year would be between six to eight percent, thanks to the good showing of passenger cars and commercial vehicles in the country. Having said that, for the economy as a whole, the odds of it going the way of last year’s trend is not there as interest rates are stabilisng, at the same time, monsoon is expected to be normal”.
India’s Central Bank, The Reserve Bank of India, which increased interest rates by a staggering 3.75 percentage points from March 2010 to October 2011 with the intention of checkmating the price increases. What is more, the RBI is likely to cut rates in April, the report quoted R Gopalan, Secretary, Economic Affairs, Government of India as saying in March.
As the rubber growers are hoarding natural rubber anticipating a windfall price increase, naturally the rubber imports had gone up in the recent months, Budhraja noted and added that there were constant and continuous rise in rubber prices. ‘The Rs 200 level has become a psychological level with natural rubber growers, meaning any drop below this level, they would be tempted to hold on to their stocks’, he added.
Stating that the benchmark RSS-4 rubber in the country was pegged at Rs 198 a kilogram on April 13, 2012 which was 3.1 percent more than the previous month, quoting the statistics from the state owned Rubber Board, the report continued. While the September delivery rubber declined by 1.1 percent to close at 306 yen per kg on the Tokyo Commodity Exchange.
The paucity of natural rubber in India would further widen as proliferation of car sales and the eventual boost of tyre production demand, the report quotes Vinod Simon, President of the All India Rubber Industries Association as saying. The defecit for natural rubber would further increase to 511,000 tonnes in 2014-15 from 100,000 tonnes in 2012-13. Simon told the media in March while expressing his take on economic growth of 6.5 percent a year.
Jom Jacob, Senior Economist at the Association of Natural Rubber Producing Countries told the daily via e-mail: “The shortage will progressively widen on account of India’s constraints in increasing the domestic production,” Jom Jacob, a senior economist at the Association of Natural Rubber Producing Countries. What is more, there is acute shortage of skilled and unskilled manpower”.
Natural rubber production in the country has surged 4.3 percent to 899,400 tonnes in the year ended March 31, 2012 from 861,950 tonnes produced during the year ago period, while consumption advanced two percent to 966,215 tonnes, quoting the Rubber Board, the report said and added that the inventory at the end of March this year were 230,000 tonness, down 20 percent from the previous year.
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