Gloomy days are ahead for the rubber industry with a slump in production and consumption alike. The recent petrol price increase and a strike at the Maruti plant in Manesar may force tyre manufacturers to trim production, though improved tyre exports due to the depreciation of rupee may bring a slight relief.
Generally, demand picks up from mid-September with rubber production entering the peak phase. But this year, the situation is anything but optimistic. “At this rate, the financials of tyre companies may take a knock. Companies could even think of slashing production,” said Rajiv Budhraja, director general of Automotive Tyre Manufacturers’ Association.
Tyre companies are yet to buy a large chunk of 40,000 tonne of rubber, the import of which has been sanctioned by the government. But imports look difficult now as international price trends are not favourable. According to Budhraja, it would have been viable if the companies had shipped the material in March.
A weaker rupee may provide some relief as it will help boost tyre exports. Total rubber exports have risen around 180 percent to 12,219 tonne for the five-month period ended August 2011. With international price remaining Rs 7 higher at Rs 225 per kg, rupee depreciation is expected to accelerate the trend.
Heavy rains have hindered rubber tapping causing a decline in production. Production fell by 1,300 tonne to 71,200 tonne in August though overall production in the current fiscal was higher by 4.5 percent at 3,11,200 tonne. “The figures reflect latex production. The production of sheet rubber, which is mostly traded, is down by almost 50 percent”, said Biju John, proprietor of CPM Spices Corporation.
The October-November period is the peak production phase of rubber in the country. With the rains staying away, tapping could begin in earnest. Domestic rubber prices shot up to Rs 218 per kg last week after dropping to Rs 198 per kg in August. But heavier production and lack of demand could push down prices further, say the traders.