Rubber prices have softened despite the decision of top producers Thailand, Indonesia and Malaysia to cut exports from next year, leading to expectations that the prices may not rise in the short term as the coming New Year holidays may squeeze the already weak demand in the global market.
The new year holidays in December will be followed by the Chinese new year, said Swaranjit Singh, materials director of JK Tyres, adding, "So rubber prices are not likely to improve for next two-three months."
China is the largest consumer of rubber and a slack buying by the country is cited as one of the reasons for the poor global rubber prices. According to industry experts, there is still a surplus stock in the global market and unless the cut in exports is implemented, the prices may not rise.
The Indian tyre industry is depending more on cheaper imports as the availability is still tight in the domestic market.Rubber prices have remained flat in India at Rs 117.50 per kg for the past few days, about Rs 17 more than the current international rate. The imports have already crossed 2.6 lakh tonne, showing a 25 per cent increase with a plunge in production.
"Countries like Vietnam, Cambodia and Laos are ex porting rubber in large quantities. It has become easier for even a small dealer to import one or two containers," said Biju John, a prominent rubber dealer based in Kottayam. The procurement of rubber by the state agency RubberMark at Rs 5 more than the market rate is yet to impact the prices, as substantial quantities have not been purchased. Involvement of a national organisation like Nabard to procure rubber will make an impact as it has huge funds to spare, funds to spare, John added.
Despite this being a peak harvest season, the tapping is still sluggish. "About 25 per cent of the rubber plantations are still not tapped. The peak season will end by the middle of January. The growers don't realise that they will not be left with much stock during the lean season," another dealer said. The dealer, who did not wish to be named, said the tyre firms can be tempted to buy from the domestic market if the state government is willing to forgo the sales tax for the purchases.
Meanwhile, the All India Tyre Dealers Federation has voiced concern at the tyre companies not cutting the tyre prices despite the natural rubber prices hitting a five-year low. "The tyre bodies like ATMA (Automotive Tyre Manufacturers' Association) , instead of clamouring for restriction on tyre imports, should roll back the domestic tyre prices in tune with the steep fall in raw material prices so that they can discourage tyre imports further," said the federation's convenor SP Singh.
