Mumbai/Kochi: Tyre manufacturers and other user industries of natural rubber complained of lack of the commodity’s availability even as its prices touched Rs 137 a kg. The prices, however, cooled down and ended lower than Monday’s Rs 135 as some growers offloaded their produce.
“The problem of rubber prices touching new highs is one. But importantly, we are not able to get the stocks even at these prices,” said Rajiv Buddhiraja, Director-General of the Automotive Tyre Manufactuers Association, the apex body of tyre manufacturing companies.
“Rubber is not available even at these high prices as people are holding on to their stocks. With prices going up every day, growers are looking for further rise in prices,” said N Radhakrishnan of Cochin Rubber Merchants Association.
Reasons
“The reasons for rubber prices rising to record are galloping global market prices and crude oil prices topping $135 a barrel,” he said.
Sources in the Rubber Board pointed out that the spike in rubber prices was mainly due to low arrivals in the market. While the demand continues to reign high, the supply continues to be low as rubber production dips sharply during the hot summer months due to poor yields from rubber plantations.
Costlier imports
Global prices of rubber are higher than domestic prices, making imports a bit costly. “International prices are Rs 2 a kg higher than domestic prices,” said Radhakrishnan.
“At some point of time, it will make sense to import. Tyre companies may import between 80,000 tonnes to one lakh tonnes,” said Buddhiraja.
Last fiscal, rubber imports were 74,335 tonnes against 89,669 tonnes the previous year. Exports, on the other hand, were around 53,000 tonnes compared with 56,500 tonnes.
Speaking at a function to release the report of Golden Jubilee Year of the Rubber Research Institute of India at Kottayam, the Rubber Board Chairman, Sajen Peter, said there were requests to temporarily ban the exports.
“We suspect that speculators who were in the futures market are now present in the spot market too,” said Radhakrishnan. “Prices are also rising because the industry has resorted to sort of panic purchase,” he said.
Stocks situation
Buddhiraja said though the Rubber Board had projected stocks at around 1.9 lakh tonnes, there was a need to reassess the situation. “However, the tyre companies have enough stocks to take care of production requirements now,” he said.
Rubber production last fiscal has been estimated at around 8.25 lakh tonnes against 8.10 lakh tonnes the previous year.
On the other hand, the sharp spurt in international crude oil prices has taken the price of synthetic rubber to new highs. While earlier it was possible to augment the supply of rubber by increasing synthetic rubber production at short notice that is no longer the case now. Moreover, the carryover stocks are also at low levels.
However, Buddhiraja said tyre companies were now planning a change in the product mix, wherever it was possible.
Meanwhile, tyre manufactures said they were under pressure to increase prices further. Some manufacturers who had hiked prices in April are thinking of another revision as prices of rubber, their main input, touched record levels.
Constraints
“All that we can do is to pass on it to the customers,” said Paras K Chowdhary, Managing Director of Ceat, talking about the about the increasing cost pressure. “But we cannot raise the prices beyond a point since we are operating on a competitive environment. But we will slowly do it. Our margins are under pressure,” Chodhary said.
“The situation is totally out of hand. The future trade ban has not helped bring down rubber prices. It has instead gone up further. The price goes up because there is a fundamental demand – supply gap. There is an acute shortage of rubber globally and domestically,” Chowdhary said.
Rubber accounts for 60 per cent of the input cost for tyre makers. They consume nearly 4.9 lakh tonnes of rubber a year.
“We are particularly hurt as crude price, transport cost and wages also have gone up. There is very little we can do about it,” Chowdhary said.
There are now reports that the tyre manufacturers are in talks with the original equiment (OE) manufacturers on price revision.
The tyre prices remained constant for more than a year for the OE supplies, while prices in replacement market moved up by 7-10 per cent in the last one year.
Short-term outlook
The firm price trend is likely to continue as rubber tapping is not pursued during heavy rains in the months of June and July. The production and arrivals begin to pick up only by early August. So, the prices are not likely to come down in the short-run, sources in rubber trade said.
There is no way that natural rubber production can be jacked up overnight since there is a long gestation period of several years between planting and tapping of rubber trees.
“The problem of rubber prices touching new highs is one. But importantly, we are not able to get the stocks even at these prices,” said Rajiv Buddhiraja, Director-General of the Automotive Tyre Manufactuers Association, the apex body of tyre manufacturing companies.
“Rubber is not available even at these high prices as people are holding on to their stocks. With prices going up every day, growers are looking for further rise in prices,” said N Radhakrishnan of Cochin Rubber Merchants Association.
Reasons
“The reasons for rubber prices rising to record are galloping global market prices and crude oil prices topping $135 a barrel,” he said.
Sources in the Rubber Board pointed out that the spike in rubber prices was mainly due to low arrivals in the market. While the demand continues to reign high, the supply continues to be low as rubber production dips sharply during the hot summer months due to poor yields from rubber plantations.
Costlier imports
Global prices of rubber are higher than domestic prices, making imports a bit costly. “International prices are Rs 2 a kg higher than domestic prices,” said Radhakrishnan.
“At some point of time, it will make sense to import. Tyre companies may import between 80,000 tonnes to one lakh tonnes,” said Buddhiraja.
Last fiscal, rubber imports were 74,335 tonnes against 89,669 tonnes the previous year. Exports, on the other hand, were around 53,000 tonnes compared with 56,500 tonnes.
Speaking at a function to release the report of Golden Jubilee Year of the Rubber Research Institute of India at Kottayam, the Rubber Board Chairman, Sajen Peter, said there were requests to temporarily ban the exports.
“We suspect that speculators who were in the futures market are now present in the spot market too,” said Radhakrishnan. “Prices are also rising because the industry has resorted to sort of panic purchase,” he said.
Stocks situation
Buddhiraja said though the Rubber Board had projected stocks at around 1.9 lakh tonnes, there was a need to reassess the situation. “However, the tyre companies have enough stocks to take care of production requirements now,” he said.
Rubber production last fiscal has been estimated at around 8.25 lakh tonnes against 8.10 lakh tonnes the previous year.
On the other hand, the sharp spurt in international crude oil prices has taken the price of synthetic rubber to new highs. While earlier it was possible to augment the supply of rubber by increasing synthetic rubber production at short notice that is no longer the case now. Moreover, the carryover stocks are also at low levels.
However, Buddhiraja said tyre companies were now planning a change in the product mix, wherever it was possible.
Meanwhile, tyre manufactures said they were under pressure to increase prices further. Some manufacturers who had hiked prices in April are thinking of another revision as prices of rubber, their main input, touched record levels.
Constraints
“All that we can do is to pass on it to the customers,” said Paras K Chowdhary, Managing Director of Ceat, talking about the about the increasing cost pressure. “But we cannot raise the prices beyond a point since we are operating on a competitive environment. But we will slowly do it. Our margins are under pressure,” Chodhary said.
“The situation is totally out of hand. The future trade ban has not helped bring down rubber prices. It has instead gone up further. The price goes up because there is a fundamental demand – supply gap. There is an acute shortage of rubber globally and domestically,” Chowdhary said.
Rubber accounts for 60 per cent of the input cost for tyre makers. They consume nearly 4.9 lakh tonnes of rubber a year.
“We are particularly hurt as crude price, transport cost and wages also have gone up. There is very little we can do about it,” Chowdhary said.
There are now reports that the tyre manufacturers are in talks with the original equiment (OE) manufacturers on price revision.
The tyre prices remained constant for more than a year for the OE supplies, while prices in replacement market moved up by 7-10 per cent in the last one year.
Short-term outlook
The firm price trend is likely to continue as rubber tapping is not pursued during heavy rains in the months of June and July. The production and arrivals begin to pick up only by early August. So, the prices are not likely to come down in the short-run, sources in rubber trade said.
There is no way that natural rubber production can be jacked up overnight since there is a long gestation period of several years between planting and tapping of rubber trees.
1 comment:
This is no doubt a good comment and a useful piece of information shared. we too are of similar opinion.
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