Rising Rubber Prices To Hit Tyre Units Hard

Thiruvananthapuram, May 30 | Updated: May 31 2004, 05:30am hrs
Domestic prices of natural rubber (NR) have bounced to vault the Rs 60 per kilo-mark this week, light-footed after offloading the bulk of buffer stocks. Contrary to the usual seller dynamics of going jittery over the tyre industrys jumbo import foray, the prices this week sparkle with farmer-confidence.

Only in January 1996, natural rubber prices in the country have crossed to touch Rs 64 per kilo. Unless there is a pro-industry policy intervention, all factors point to a repeat of the farmers golden January. Low stock arrivals have also buoyed the prices.

Price of RSS-4 (Ribbed Smoked Sheet) has closed at Rs 60.50 per kilo, over Rs 58.5 per kilo at last weeks closing, immediately after ATMAs (Automotive Tyre Manufacturers Association) announcement of stepping up its rubber imports. According to reports quoting ATMA, in April-August 2004, imports of rubber would be 26,500 tonnes as against 18,000 tonnes in the corresponding period in 2003.

Early arrival of south west monsoon has made tapping nearly impossible. Despite the price high, the movement of rubber lots to the market is so sporadic that this weeks trading volumes in Kottayam and Kochi markets have been as low as 500-550 tonnes. Compared to the last week, trading volumes are at absolute standstill.

Tyremakers could toughweather the high rubber prices with a grumble or two. However, what is the much-awaited price-picnic for small farmers could throw small industrialists in soup, says N Radhakrishnan, President, Cochin Rubber Dealers Association (CRDA).

However much the industry imports, they cannot bring in natural rubber beyond what their advance licences permit, he points out. One reason why domestic prices kept their cool at the import announcement was that the import of RSS-3 (the Singapore equivalent of Indian RSS-4) was unviable going by the present margin between the SICOM (Singapore Exchange) prices and Indian prices.

Coupled with taxes and cess, there should be a margin of at least Rs 6 per kilo for import to be feasible.

The general perception among rubber-producing co-operatives is that the industry will be mainly going for the import of crumb rubber from Malaysia, which is not a direct substitute for RSS-4.

In earlier seasons, what had created market mayhem in the farmlands was the psychological burden of over two lakh tonnes in stockpiling. Rubber Boards initiatives in export promotion has paid off in undoing this market distortion.

From 1.9 lakh tonnes in March 2003, buffer stock of natural rubber has come down to just 80,000 tonnes in March 2004. This was achieved by bringing up rubber exports from 8000 tonnes in 2001-2002 to 70,000 tonnes in 2003-2004, Rubber Board officials claim.

If succeeding governments have been protective towards the production-side, this has been because 85 to 90 per cent of the 10 lakh rubber farmers in the country are in the very small land-holding category.