Kochi, March 16
As the temperatures soar over major rubber growing belts in South India, arrivals of rubber in the base form of field latex have trickled down.
The moisture stress of the soil is getting reflected in low production of field latex which has 65 per cent of water content, sources in the sector said.
With the demand for raw latex escalating, the conversion to rubber sheets has slowed, accentuating a crisis in the tyre and rubber industry.
Rubber latex
“As the Chinese economy has shown its resilience and growth, there has been a major shift in demand from cotton mattresses to those made from rubber latex, spinning a demand for millions of new mattresses every year.
This has kindled an unprecedented demand for centrifuged latex in the global markets, of which India is also a major beneficiary.
Demand-supply crunch
Consequently, the rubber sector is confronting a major demand-supply crunch as tyre and centrifuge latex industry competes for the same raw-material, natural rubber,” Mr N. Radhakrishnan, former president of the Cochin Rubber Merchants Association, said.
Price differences
Indian rubber prices have soared to record levels, within touching distance of Rs 150.
The price differential between sheet rubber and latex which was traditionally in favour of sheet rubber is also turning around. With the spurt in export demand, latex prices are turning favourable for the farmer. This is all the more the case since the field latex does not require any additional labour in conversion, smoking and drying operation or gestation time between the field and the market.
With the booming demand from the automobile industry, tyre production in the country has also shot up.
Tyre production
Tyre production grew by 16 per cent to 792 lakh units (684 lakh units) during the first 10 months of the current fiscal.
Bus and truck tyre production has also grown by 14 per cent to 122 lakh units (107 lakh units) during the April-January period, according to figures from the Automotive Tyre Manufacturers Association (ATMA).
Currently, the tyre industry is the biggest consumer, accounting for close to 60 per cent of the rubber produced in the country. And the bus and truck sector is the biggest consumer of natural rubber in the tyre sector.
As the country's rubber production this year has dipped 4.3 per cent to 7.80 lakh tonnes (8.16 lakh tonnes) during April-February 2010. Much of the demand-supply shortfall has so far been met by increased imports. Rubber imports during the first 11 months have grown by 122 per cent to 1.57 lakh tonnes (71,000 tonnes), much of it to meet the rising demands from the tyre industry.
Demand curve
Rather than a reflection of the demand curve meeting the supply curve, the current spell of price rise reflects a true trickling down of arrivals in the market, sources in the trade said. Despite the high prices, there are hardly any arrivals and volumes are very thin. There are too many buyers chasing too little product. But the situation could improve with the onset of summer showers and increased arrivals in the market, the sources added.
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