Tight supply forces cos to import rubber despite Rupee fall

KOCHI: A falling rupee is making natural rubber imports costlier but the tyre industry has no option but to continue shipments because of tight supplies in the domestic market. Given the wide gap between global and Indian prices, the rupee’s decline may not have a strong impact on natural rubber imports, say industry sources. They are also planning to take measures to cushion the impact of a depreciating rupee.

“Natural rubber imports coming now were contracted earlier. In the coming weeks, we may have to take a forex cover to counter currency fluctuation in the case of duty paid imports,” said an official with Ceat Tyres. The global price of block rubber SMR 20 which is imported for use in tyres is at around Rs 132.84 per kg. But the import of this variety works out to be cheaper because the price of RSS 4, a domestic variety used by the tyre industry, has been rising this month because of a shortage in the market.

The RSS 4 price stood at Rs 173 per kg on Monday and its equivalent variety in the international market was lower by more than Rs 10. Monsoon rains have disrupted tapping in the main rubber producing region of Kerala. “There is no stock in the market now. The monsoon has hit tapping. Besides, there are reports of delays in shipments from Vietnam and Indonesia. As a result there is a bullish trend,” said Biju John, a dealer based at Kottayam. Natural rubber imports during April-May have been pegged at around 32,000 tonne and may continue in the same vein this month too, said dealers.

In the absence of sufficient supplies in the domestic market, the price could move upwards in the coming days. “We are keeping an inventory of 10-12 days. Tyre production in the April-June period was better than the same period in the previous year. However, the prospects are still uncertain,” said Swaranjit Singh, materials director of J K Tyres. Higher imports are also triggered by the fear of an imminent increase in the import duty of rubber. Indications are that international rubber prices will continue to be subdued with supply exceeding demand.

The November contract on Tokyo Commodity Exchange fell to 243.6 yen a kg last week, the lowest since April 18, extending the losses this year to 19%. Thailand, Indonesia and Malaysia -- the three major rubber producers -- are meeting this week to review steps taken a few months ago to reduce exports to arrest price fall.