Mr K. M. Mammen
Chennai, March 24
The tyre industry, the largest consumer of natural rubber, has urged the Centre to allow duty-free import of at least two lakh tonnes of natural rubber on a priority basis, preferably through a Government agency.
It has also asked for a differential customs duty structure allowing imports at a lower duty – about 7.5 per cent – to facilitate imports during the lean months of natural rubber production.
According to Mr K.M. Mammen, Chairman and Managing Director, MRF Ltd, in case rubber prices increase above a certain level – say, Rs 90 a kg – the customs duty on natural rubber should be on a fixed basis, instead of an ad valorem structure. For, when natural rubber prices go up, consumers not only have to pay the increased price but also shell out more due to the ad valorem duty. When natural rubber costs Rs 75 a kg, the import duty at 20 per cent ad valorem works out to Rs 15 a kg, but when the price increases to Rs 150 a kg, the incidence of customs duty doubles to Rs 30 a kg.
Such a change in tariff has been introduced in China, according to Mr Mammen, to make its domestic tyre and rubber producing interests more competitive and viable.
Widening gap
The tyre industry's demand for easing imports on natural rubber stems from the widening gap between domestic production of natural rubber and its consumption, and also to take care of consumption during the lean rubber production months of March-August.
According to Mr Mammen, the tyre industry is raw material-intensive. Natural rubber is the single largest raw material for tyre production and accounts for 42 per cent of raw material cost. The tyre sector accounts for 62 per cent of total domestic natural rubber production and others – footwear, rubber parts for auto components and gloves – the balance.
Rising consumption
Mr Mammen said that domestic rubber production had failed to keep pace with the rising trend in consumption, especially in the recent years. For instance, he said, rubber production was 825,345 tonnes in 2007-08 when consumption was 861,455 tonnes.
In 2009-10, production was estimated at 840,000 tonnes and consumption 931,000 tonnes; and for 2010-11, the production was projected to grow to 901,680 tonnes while consumption would increase to 986,860 tonnes.
In view of the widening gap between production and consumption and to take care of consumption during the lean production months, rubber consumers have no option but to import. However, Mr Mammen said the inverted duty structure was a restrictive factor and an anomaly that had remained unaddressed for some time. In 1996-97, the peak rate on non-agricultural goods was 50 per cent, on tyres 50 per cent and on natural rubber 20 per cent. In 2010-11, this had become 10 per cent each on non-agricultural goods and tyres, while it remained 20 per cent on natural rubber.
The inadequate production of rubber and prohibitive imports resulted in high cost of key raw material for tyre production, had an adverse impact on tyre production with resultant uncertainties on tyre supplies to vehicle manufacturers, and encouraged import of finished products such as tyres despite there being adequate domestic capacity, he said.
High speculation pushes up rubber prices
| Heavy futures trading, the key reason. |
Demand for rubber in the spot market will not wane as long as the futures prices remain at very high levels, offering good margins for traders
Kochi, March 24
Despite the country having adequate rubber stocks of 2.69 lakh tonnes (lt), prices continued their upward march, crossing the record level of Rs 155/kg earlier in the week.
Even as the prices continued to reign at all-time highs, what was surprising was that there was a fair amount of trading, Mr N. Radhakrishnan, former President of the Cochin Rubber Merchants Association, said.
Amongst other reasons, the current spell of price rise can be attributed to speculators, sources in the trade said.
They pointed out that at the end of January the country had rubber stocks of 2.87 lt. Of this, the growers were supposed to have been holding on to stocks of 1.26 lt, processors held 30,000 tonnes, dealers had 65,000 tonnes, the tyre industry 50,000 tonnes and other rubber using industry had 16,000 tonnes.
The total rubber stock in the country is reported to have dipped marginally to 2.69 lt in February.
Surprising rise
While the country still has adequate stocks, the sharp rise in prices is surprising.
Although the traders said that there could be a fair amount of exaggeration in the stock held by the farmers, they said the stock held by the processors, dealers, tyre and other rubber consuming industry would be far more authentic, as they had to file returns of the stock held by them, which the growers do not have to.
Even accounting for exaggeration of the rubber stocks held by the growers, the outstanding stocks should be well over two lakh tonnes – sufficient to meet the immediate needs of the country.
It is in this background that the role of speculators cannot be discounted, the rubber traders warned. They said the demand for rubber in the spot market will not wane as long as the futures prices remain at very high levels, offering good margins for the traders. As long as the price differentials remain pronounced, the futures trader would be induced to buy and stock in the spot market to undertake delivery trade in the futures markets, Mr Radhakrishnan said. This, he said, was the most likely reason why there was fair amount of demand at the current high levels.
But the trend seems to be reversing with futures prices closing weak on Monday The arrivals are also likely to pick up in the coming months as the winter season of low production and availability of the past couple of months is now more or less behind us, the sources added.
WORLD RUBBER NEWS:
Rubber Output May Decline in Indonesia on Weather, Group Says
March 24 (Bloomberg) -- Rubber output from Indonesia, the world’s second-largest producer, may decline this year if unfavorable weather persists into the second half after rains disrupted first-quarter tapping, an industry association said.
Production may decline to 2 million metric tons in 2010, Asril Sutan Amir, the chairman of the Rubber Association of Indonesia, said today by phone. Amir had forecast in December that Indonesia may produce 2.5 million tons this year, up from 2.4 million tons in 2009.
Lower supplies from Indonesia may help to further support the price of rubber, which has advanced more than 90 percent in the past year on expectations that the global economic recovery may boost demand for tires and gloves. Most of the Asian nation’s supply is grown on the island of Sumatra.
“It’s been raining almost every day since February in Sumatra, forcing farmers to reduce tapping,” Amir said from Jakarta, the capital. “Even if the rains happen just in the morning, we skip tapping for the entire day.”
Rubber for August-delivery on the Tokyo Commodity Exchange was little changed at 288.8 yen a kilogram ($ 3,190 a metric ton) at 11:40 a.m. Jakarta time. Thailand is the biggest producer of the commodity and Malaysia is third.
“This is the impact of climate change,” said Amir, whose association represents state-owned and private plantations, as well as processors, exporters and traders. The start of the dry season may be delayed north of the equator, which may hurt rubber production in Thailand and Malaysia, he said.
Heavy rains and storms were forecast for the three days from March 23 in central, southern and western Sumatra, the Meteorological, Climatology and Geophysics Agency said March 22 in a second alert this month. The first was issued on March 11.
Malaysia and Thailand lie to the north of the equator, which crosses Indonesia’s Sumatra.
Rubber prices turn weak
Kottayam, March 24
The physical rubber prices turned weak on Wednesday. The market appeared to be moving into a corrective phase as the domestic rubber futures slipped further though there has been no visible selling pressure in main marketing centres. Sheet rubber weakened to Rs 153.50 from Rs 154 a kg on buyer resistance. The market made all-round declines except latex 60 per cent which closed unchanged on comparatively better demand.
Futures decline
The April futures for RSS 4 weakened to Rs 156.45 (157.13), May to Rs 158.20 (158.85), June to Rs 157.75 (158.54) and July to Rs 157.67 (158.50) a kg on National Multi Commodity Exchange (NMCE). The March futures for RSS 3 closed at ¥303.9 (¥303.7) (Rs 150.97), April at ¥300.5 (¥301), May at ¥298.4 (¥297.8), June at ¥295.5 (¥295.1), July at ¥291.4 (¥291.3) and August at ¥288 (¥287.8) a kg during the day session on Tokyo Commodity Exchange (TOCOM). The March futures firmed up to ¥304.5 (Rs 151.27), April to ¥302, May to ¥300.3, June to ¥298, July to ¥294.2 and August to ¥290 a kg on late trades. RSS 3 closed at Rs 151.90 (151.62) a kg at Bangkok. The grade improved to Rs 150.07 (149.51) a kg on Singapore Commodity Exchange (SICOM).
Spot prices were (Rs/kg): RSS-4: 153.50 (154); RSS-5: 152.50 (153); ungraded: 151 (152); ISNR 20: 151 (152) and latex 60 per cent: 100 (100).
Auto majors' advance tax payout soars with sales
New Delhi, March 24
The auto pack has put up a strong show on the advance tax front this fiscal, with the payouts of most auto majors registering increases between 19 and 1,524 per cent on a year-on-year basis.
The fourth instalment (March 15) payouts increased 115-576 per cent for most companies on the back of pick-up in sales in January and February this year, as customers rushed to beat an expected hike in prices soon after the Budget.
Maruti Udyog, the country's largest car manufacturer, has forked out an advance tax of Rs 1,007 crore in 2009-10, more than double the payout of Rs 401 crore in 2008-09. For the March 15 instalment this year, Maruti's advance tax payout was Rs 250 crore (Rs 36.6 crore), the latest data available with the Revenue Department showed.
Tata Motors, which did not pay any advance tax in the fourth instalment of 2008-09, has paid Rs 115 crore in the March 15 instalment this year. For financial year 2009-10, the advance tax payout of Tata Motors stood at Rs 445 crore (Rs 90 crore).
Mahindra & Mahindra's advance tax payout registered a huge jump in 2009-10 to Rs 560.5 crore (Rs 34.5 crore). For the fourth instalment, the payout was Rs 236 crore (Nil for March 15, 2009)
The strong show on the advance tax front could be a signal that these companies expect to close the current fiscal with better bottom line performance than last fiscal, when the global financial crisis had cast a shadow on their growth performance.
The auto industry recorded the highest ever sales for a month in February 2010 at 11.29 lakh units (11.14 lakh units in January 2010). The domestic passenger car segment recorded the eleventh straight month of growth in February at 1.54 lakh units (1.16 lakh units in February 2009).
Most auto majors had passed on to the customers the excise duty hike announced, as part of partial withdrawal of stimulus, in Budget 2010-11. The auto sector had been a significant beneficiary of the stimulus packages rolled out by the Government in the second half of 2008-09 in the wake of global financial meltdown.
In Budget 2010-11, the Finance Minister, Mr Pranab Mukherjee, had announced a hike in the general Cenvat rate for non-petroleum goods to 10 per cent from 8 per cent. Mr Mukherjee had also announced a hike in the ad-valorem component of excise duty on large cars, multi-utility vehicles and sports utility vehicles.
MY View
The robust growth of auto industry in INDIA and CHINA clearly signify the future demand of tyres and hence high demand of natural rubber. This demand will surely lead to more higher prices. Also climatic conditions are adverse in all the rubber producing countries due to global warming which will surely widen the gap between demand and supply of natural rubber...
Natural rubber price hike may make tyres more expensive
The recent rise in natural rubber (NR) prices has prompted the country’s leading tyre companies to re-think their price strategy. A hike in tyre prices for the second time in a year seems imminent, say analyst
In just over four weeks, the price of the benchmark grade, RSS-4, has increased 10 per cent to Rs 155 a kg.
According to sources, a price increase across categories is on the cards over the next couple of months. Tyre prices went up 2-7 per cent in January this year. Natural rubber accounts for almost 50 per cent of the total production cost of a tyre.(BS) http://www.business-standard.com/india/news/natural-rubber-price-hike-may-make-tyres-more-expensive/389652/
Rubber Gains on Speculation Economic Recovery May Boost Demand
March 24: Natural rubber advanced on speculation that a firmer economic recovery will increase demand for the commodity used in tires. Futures on the Tokyo Commodity Exchange rallied as much as 0.7 percent as the MSCI Asia Pacific Index climbed to a two- month high as signs of growing demand for commodities boosted confidence in the strength of the global economic recovery. (Business Week) http://www.businessweek.com/news/2010-03-24/rubber-advances-on-speculation-that-recovery-may-boost-demand.html
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