Domestic price of natural rubber (NR) has collapsed to further lows despite the supply crunch due to the August floods which ails the country’s rubber belt.
Domestic price of natural rubber (NR) has collapsed to further lows despite the supply crunch due to the August floods which ails the country’s rubber belt. The price of the premium RSS-4 grade of NR has touched the three-month low of Rs 120 per kilo, dipping further from the last week’s Rs 121.
With the shortage in domestic production, NR imports have surged, further lowering the domestic NR price. From 2,25,000 tonnes in April- September in 2017, imports have gone up to 2,94,000 tonnes in the corresponding period in 2018, according to the latest data from Rubber Board of India.
“Even with the weak rupee rendering imports costly, we have no option but to ramp up imports for our raw material requirements because of the fall in domestic availability,” Rajiv Budhraja, director general, Automotive Tyre Manufacturers Association (ATMA) told FE. The tyre industry consumpts 65 to 70 % of the country’s rubber.
“In September 2018 alone, India’s NR production has fallen 15% over the previous year and consumption has grown 16%,” he said. The rating agency, ICRA, had recently reported imports account for 40% of rubber consumption in the past five years and this is expected to balloon to 50% in 2019. Currently, imports are viable as RSS-3 grade ( the equivalent of Indian RSS-4) at Bangkok is, on spot-basis, selling at 98 per kilo, but in the long run, the tyre industry, too, is likely to feel the import-intensive pinch in its margins.
After the August’s deluge in Kerala, rubber sector had suffered loss in tapping days and abnormal leaf fall, and this could impact NR production in 2018-19, said D Anandan, chairman, Rubber Board. Although the Board estimates the total NR production for the current year would be around six lakh tonnes, ATMA is apprehensive that it could be lesser.
Meanwhile, there is yet to be any policy on the Rs 247-crore relief package proposal on the flood-hit sector in Kerala. High-wage cost coupled with the flood-related production worries, rubber sector has been seeing abandoned plantations and even growing shift to more viable crops. “Running a rubber estate has been more like owning a white elephant, rather than utilising a productive asset. The continuous fall in price is aggravating the future of rubber cultivation,” said Josekutty Antony, a rubber nursery owner.
In short, there is hardly any green shoot in sight for the rubber sector, except for a stray optimistic forecast like that of Jom Jacob, senior economist, ANRPC ( Association of Natural Rubber Producing Countries). According to the economist, NR price may see recovery in 2022, based on factors like higher global rubber consumption.