Auto recovery, supply shortage lift rubber price above Rs 100/kg

With the auto industry showing signs of recovery, the demand for rubber by tyre companies has increased. Along with tight supplies, this has led to a 37% increase in rubber price over the past month to over Rs 100 per kg. Tyre companies have also stepped up rubber imports with local prices quoting at a premium to international prices.

According to George Valy, president, Indian Rubber Dealers Federation, “Earlier due to low demand tyre companies were not keeping much of inventory and were running at close to 75% capacity. But now they are running at higher capacities with demand picking up especially by original equipment manufacturers.”

After showing a negative growth for the past six months, the commercial vehicle industry posted a marginal growth in March this year. Even the passenger vehicle market showed positive growth after being in the negative zone for three months (December 2008-February 2009). Automotive Tyre Manufacturers Association (ATMA) director general Rajiv Budhraja said that the industry faced problems since rubber was not being released in the local market.

He added that there was some demand from the auto industry but that it was not the major reason for a price rise. “With all the tyre plants running the companies will double their imports this year (2009-10 ) to 1.6 lakh tonne compared to the previous year as rubber is not available locally,” he said.

Mr Valy said that with imports expected to increase local prices would correct as growers will start bringing their stocks to the local markets. He added that growers were holding back between 75,000 and 100,000 tonne of rubber since prices were rising daily.

Despite the Rubber Board figures showing ample stocks of over 200,000 tonnes compared to lower stocks last year the same are not being supplied in the local market, supporting prices. At present, Indian rubber prices are at Rs 15-Rs 18 per kg premium to the international prices being quoted at Singapore which is the main rubber trading centre. Rubber is produced mainly in Thailand, Indonesia, Malaysia and India.

The futures May contract on NMCE opened higher at Rs 101.95 per kg and moved up to Rs 103.75 before closing marginally lower to its previous close at Rs 99.45. The Indian markets opened firm following the positive global markets which rallied with Japanese stimulus package reviving the equities and crude oil prices, said Anand James, senior analyst at Geojit Comtrade.

“I am positive on the prices as key producing centres will not let the prices come down below a certain levels while the demand is also looking up,” he added.