Besides the windfall of an Olympics year in the premier rubber buyer country China, crude high is giving a thorny bouquet to rubber growers. At the same time, the domestic rubber production is yet to signal enough growth to make good the 50,000 tonne shortage of 2007.
The price of RSS-4 grade NR (natural rubber) has been ruling at Rs 95 per kilo. While tyre majors like MRF tyres have resorted to importing against advance licenses, small tyre firms like Falcon Tyres are now forced to dip into local market to meet their inventory requirements, trade sources told FE.
Rubber growers had been in apprehension that Chinese requirements for Olympics-driven infrastructure would be exhausted by 2008, but reports from China say otherwise. In 2008, Chinese rubber demand is expected to grow by 12%, according IRSG (International Rubber Study Group) reports.
In crude oil price high, however, rubber growers would find a mixed fortune, says CT Krishnan, head of commodity futures at Geojit Paribas Inc. From $50 per barrel, crude now costs $100 per barrel, translating directly into substitution of SR (synthetic rubber) by NR. But, this could work out the other way as well. Crude, going dearer would slacken tyre demand from automobile sector. ?We expect the demand slowdown only in the second half of 2008,? says Krishnan.
Rubber Board projects natural rubber output of just 8,19,000 tonne. In 2007, this was 8,53,000 tonne. In 2006-07, rubber consumption at 8,21,000 tonne was lower than the production in the year, but a rise in consumption has changed the situation this fiscal.