Rubber set to soar further on demand from tyre makers

MUMBAI: The market is preparing itself for an increase in the natural rubber price amid tight supplies and higher demand from tyre makers. Rubber prices have firmed up since May 1, from around Rs 80 per kg to Rs 88 per kg at present.

Of the total consumption of 8.2 lakh tonne of rubber in 2006-07, the tyre industry's consumption was over 55%. There would be a 5% increase in demand for rubber from tyre companies this year, Automotive Tyres Manufacturers Association's director general D Ravindran told ET.

Mr Ravindran said that supplies are tight since growers are holding back stocks in anticipation of higher prices. "Normally the extra production comes to the market from February onwards but this year it has not come," he said.
Traders expect that after mid June prices would touch Rs 100 per kg.

However, according to Mr Ravindran, prices are unlikely to rise since the carryover stocks of 1.6 lakh tonne will at some point hit the market. "If domestic stocks are not there, we can go for more import this year," he said, adding that as against 88,000 tonne import last fiscal there can be import of 1 lakh tonne this year.

Meanwhile, according to Kottayam traders stocks have exhausted and a growing demand from tyre manufacturers will move up prices. Geojit Commodities head C P Krishnan said the current stocks will be exhausted by June. "Prices would steadily rise with initial support coming at Rs 96 per kg levels," he said.

Kottayam-based trader and planter Bijosh P Thomas said delivery pressure led to panic selling from March onwards when stocks were sold at a lower price. Exports were also affected with rupee rising, even as imports continued. Tapping was also delayed due to weather conditions, causing a loss of 40,000-50,000 tonne of rubber, said Mr Thomas. Supply will worsen with monsoon when tapping comes to a halt.

"Between March and May '06 the production was 9-12 kg; this has come down to 5-7 kg this year," said Sijo, a Kottayam-based supplier to firms like Birla Tyres and J K Tyres.

Prices have also moved up in the international market. Bangkok closed at Rs 96.95 per kg on Thursday as against the previous close of Rs 94.55 while the Malaysian market closed at Rs 92 (Rs 89.91).