April rubber output rises 15.5%

April rubber output rises 15.5%
- board
Posted: 04 May 2010 02:28 AM PDT
MUMBAI - Rubber production rose 15.5 percent to 59,500 tonnes in April on summer rains and as record prices prompted farmers to increase tapping, the Rubber Board said in a statement on Tuesday. In April 2009, the country had produced 51,520 tonnes of rubber, it said.

The spot price of the most traded RSS-4 rubber (ribbed smoked sheet) hit a record high of 16,950 rupees per 100 kg in Kottayam, Kerala, in April, data from the Rubber Board showed. The consumption also jumped in the month by 7.5 percent to 79,000 tonnes on strong demand from tyre makers; however imports fell by 41 percent to 6,128 tonnes due to higher prices in global market, it added. India's rubber production is likely to rise by 7.5 percent to 893,000 tonnes in 2010/11 helping reduce costlier imports, a senior Rubber Board official said last month.
(economictimes.indiatimes.com)





Rubber hits record high of Rs 170/kg, cos seeks relief
Posted: 04 May 2010 02:27 AM PDT
Rubber prices have hit a fresh 20-month high of Rs 170 per kg. Thought tyre makers are hiking prices to maintain margins, they are unable to pass on the entire cost.
Commenting on the same, Neeraj Kanwar, Chairman, Automotive Tyre Manufacturers' Association, and Vice-Chairman, Apollo Tyres, said prices have gone up from Rs 80 per kg to Rs 170 per kg. "Shortage of natural rubber domestically is a big concern. There is a shortage of 200,000 tonne of natural rubber."
While consumption has gone up by 7% in March, imports are up 323%. The industry body, Kanwar said, is looking for respite from the government on duty for rubber.
He confirmed that the tyre industry margins are under severe pressure. "Apollo Tyres will be increasing prices by another 3.5% in June."
There is strong demand for commercial vehicle and tractor tyres. Ashok Leyland and Tata Motors are facing a shortage of radial tyres. But Kanwar said the industry is working at 95% capacity utilisation.
Apollo Tyres is planning to become one of the world's top five tyre makers. On the anvil is plans to raise output by 60% this fiscal. It expects exports as a percentage of sales to rise by 20% in Q1 FY11.
The company sees strong volume growth from original equipment manufacturers and replacement market. Though its South African and European business is seeing revival, it has shelved its international greenfield expansion plans. The company’s Chennai plant will be operational by December.
Here is a verbatim transcript of the exclusive interview with Neeraj Kanwar on CNBC-TV18. Also watch the accompanying video.
Q: This has been a very tense six-month for the tyre industry. With rubber at new highs, what is the game plan of the industry?
A: We have been taking it up with the government. The prices have gone up from Rs 80 per kg to Rs 170 per kg. We are in a very peculiar situation where our natural rubber prices on imports are commanding a custom duty of 20%, whereas our finished goods are coming in only at 7%. We have this anomaly and we have been taking it up with the government to correct this inverted duty structure.
Baring rubber, everything has corrected but I don’t know why the government has not been listening to us to let us allow free imports of natural rubber to come into India. Today there is already a shortage of natural rubber available domestically. Around 100,000 tonnes is the gap between production and consumption, which we in our own estimates is going another 100,000 tonnes in the next year. A total of 200,000 tonnes is the shortage that is going to be faced in India.
On one hand, we have the automotive sector in a boom, which requires tyres and on other had the tyre industry is facing price push that none of us can absorb. So what is going to happen is that the tyre industry is looking at increasing selling prices to the end customer there by there is going to be inflation felt as far as the automotive sector is concerned.
As far as tyre industry is concerned, today our margins are under pressure. From EBITDA margins of 14-15% last year, as a weighted average, we are into single-digits and this is putting a lot of pressure on the entire tyre industry.
Q: In that case can we assume that FY11 is going to be a bad year for the industry?
A: It is going to be challenging—I won’t say bad. The problem today is on one hand the automotive industry is increasing—you have seen figures of upwards of 30% movement for passenger vehicles and for commercial vehicles—on the other hand the tyre industry is investing close to Rs 9,000 crore in this fiscal year. We need easy cash flows, we need free cash flows to try and invest back into our industry, into our technology thereby supporting the automotive sector.
The solution that we have been trying to talk to the government is either make duty of natural rubber from 20% to 5% or to zero percent and if they cannot do that then import free of natural rubber to the Indian industry and distribute it among the India industry.
(moneycontrol.com)





IRCo's WEEKLY MARKET SNAPSHOT: 26 - 30 April 2010
Posted: 03 May 2010 09:34 PM PDT



IRCo's DCP plunged 13.07 US cents/kg. during the week under review as prices of major physical grades declined across the board dampened by sentiment on the futures market and buyers' expectations of increase in output as wintering in the major producing countries eased.

Positions liquidation ahead of the long labour holidays and profit taking on the TOCOM pushed down its rubber futures prices by more than 7% during the week.

On the physical front buyers were on the sidelines expecting prices to ease with the ending of wintering despite reports of slow recovery in output in the major producing countries concerned.

Regional currencies slipped against the greenback as opposed to the Japanese yen, whilst crude oil regained its position above the US $85 per barrel.



(Irco.biz)





Rise in natural rubber prices hits small units
Posted: 03 May 2010 03:10 PM PDT
The recent increase in natural rubber (NR) prices has hit the small scale units across the country. Around 200-300 units in Punjab and Kerala have closed down and another 500 are on the verge of closure.

In the last four months, NR prices have increased 25 per cent. The price of the benchmark grade RSS-4 was at Rs 170 a kg last week. It was Rs 138 a kg in January. The NR mart is under the grip of a strong bull rally and the small scale units cannot withstand this daily rise in prices and therefore have no option but to stop production.

A Kottayam-based manufacturer said that along with rubber, prices of other raw materials such as chemicals, metals and colours had increased 25-35 per cent during the last six-nine months.
“We are not in a position to raise prices on a weekly basis since we are facing tough competition from large manufacturers, he said.

Small units mainly manufacture moulded items, sheets, various rubber gaskets, footwear, cables, hoses and tread rubber for tyre re-treading. Although Kerala accounts for 92 per cent of the total rubber production in India, more than 60 per cent of rubber-based units are in north India, especially in states such as Punjab, Haryana and Delhi.

Because of the unorganised nature of these units, proper data on their number, production and marketing is not available.

According to data available with some manufacturers, around 500,000 workers are employed in these units and their closure of the units would create serious unemployment in skilled and semi-skilled sectors.

N Radhakrishnan, former president of the Cochin Rubber Merchants Association (CRMA), said 15-20 per cent of the total annual rubber production in India (831,400 tonnes) is consumed by the small scale units and the sharp increase in prices had led to a crisis in this sector.

He also said that offtake by small units in the north had fallen sharply during the last couple of months as the price escalated to Rs 170 a kg. The market is now pegging the tag at Rs 200 as international markets are also on an appreciating mode.

Tread rubber industry, which mainly consists of SMEs are also facing the similar problem. Because of the better quality and the advent of radial tyres, re-treading business was affected very badly.

The increase in the price of tread rubber has terribly upset their business. Even the leading tyre majors of the country are gasping with the price increase the small units can not withstand such a huge increase in the price of raw materials.

During the last one year price of RSS-4 has increased 70 per cent and price of other raw materials also registered an increase of 25-35 per cent.

All the leading tyre companies have decided to enhance their prices by 7 per cent on an average, second time in this calender year, since it is unviable to continue with the production, said Neeraj Kanwar, chairman, Automotive Tyre Manufacturers Association (ATMA) and managing director of Apollo Tyres.

“As an industry we cannot absorb such an increase in NR prices which is the main raw material in tyre production. Several small and medium rubber based units are on the verge of a closure and the condition of tyre makers is also getting worse day by day,” he added.

(business-standard.com)





Good supplies from middle of May likely to curb rally in rubber prices
Posted: 03 May 2010 03:08 PM PDT
During first quarter of 2010, rubber outperformed all leading commodities, including bullion as well equity. Rubber at the Kochi market rose from Rs 13,950 per 100 kg to above Rs 17,000 during the January – April period, offering almost 22% return within 3½ months while spot gold rose by 6.5% and the Sensex rose by 3% during same period. Such volatility was last witnessed during 1994-1998 when prices rose from almost Rs 2,500 per quintal to nearly Rs 6,000.

The rally in rubber prices is because of robust auto sector demand, growing economy of developing countries createing a huge gap between supply and demand and long dry spell at top three producing countries in the world.

Global rubber demand increased sharply since mid-2009, especially at China, while in the domestic market, boom in the auto sector created a scarcity. The automobile industry is the single biggest user of rubber, easily consuming about 70% of the world’s latex production. Continued decline in supply of rubber latex in global market pushed Indian rubber prices to a historical level. In the last 15-months, rubber prices at Kochi have more than doubled from around Rs 7,000 per quintal to Rs 17,000, offering almost 140% return in the last 15 months or more than 9% return per month.

Severe drought, the current wintering season as well as active replanting activities in most major producing countries have resulted in drop in production, while demand grew in India and China.

In India, sales of vehicles –– including cars, utility vehicles, trucks, buses, motorcycles and scooters – jumped to 12.3 million units in 2009-10, data from Siam showed.

Meanwhile, auto sales in China overtook that of the US in 2009 to become the world’s largest auto market. Apart from this, rubber prices were also supported by a weakening dollar, volatility in yen and increasing crude oil prices.

The dollar index rallied from 77.918 at beginning of the year to 82.714 on April 28 against a basket of six currencies, while crude oil prices also went up from $80 per barrel to $87 in the first week of April. Other factor which was helpful to rubber prices was the favourable weather in Thailand.

Tyre production in India touched 87.8 million units in the first eleven months of the 2009-10 financial year, a growth of 17% over the same period last year.

(financialexpress.com)





Rubber crisis looms, may hit India hard
Posted: 03 May 2010 03:07 PM PDT
C.J. Punnathara

Kochi May 2

Even as the Association of Natural Rubber Producing Countries (ANRPC) has warned of an imminent rubber crisis gripping the world economy, India seems least prepared to confront such an eventuality.

The Indian rubber crisis is twin fold: Increasing areas coming under old trees with low productivity which have outlived their economic life cycle and sluggish growth in new areas coming under rubber cultivation. India was just about self-sufficient in rubber production till recently. As Asian economies have transcended to an accelerated pace of economic development the global demand for automobiles and consequently for tyres and rubber have soared. Neither the global nor the domestic natural rubber production has been able to keep pace with the accelerated demand, sources in the rubber trade pointed out.

New area under cultivation

The new area brought under rubber cultivation in India in 2003 was just 7,000 hectares. This is just one per cent of the 6.95 lakh hectares under rubber plantations.

This meagre one per cent area would come under tapping from this year onwards as the trees would have attained maturity after seven years.

Among the other major rubber producing countries, China planted 36,300 hectares under new trees, Thailand 32,000 hectares and Vietnam 12,000 hectares.

By 2008, the new area under rubber plantation in India had grown four-fold to 27,000 hectares. But growth in area in countries such as Thailand was far more spectacular at 2.21 lakh hectares, Vietnam 75,000 and China 49,100 hectares.

As global demand continues to outstrip supply and a rubber crisis seems imminent other producing countries seem better prepared to confront such a crisis.

Replanting

Even in the realm of replanting old and economically unviable trees India seems to have fallen short of other major producing countries. While India was replanting 7,400 hectares in 2003, Thailand was replanting 52,000 hectares and Malaysia 19,100 hectares. Most of the plantations in China being relatively new, it had hardly any area which needed re-planting.

While replanting in India had nudged to 9,000 hectares in 2008, it was 40,000 in Indonesia, 32,000 in Thailand and 20,700 hectares in Malaysia. Going by the track record of India and other major rubber producing countries in bringing more areas under rubber cultivation as well as in replanting old trees with new and more productive seedlings, India seems to have fallen behind.

Output

Even as output has been slipping behind other major producing countries, India has evinced an accelerated growth in demand and consumption of rubber. In fact, major rubber consuming countries such as China, India and Malaysia together account for 45 per cent of the global rubber consumption.

China accounted 28 per cent growth in rubber consumption followed by India and Malaysia with 13 per cent. Imports into India grew by 121 per cent during Q1 this year.

As the global mismatch between rubber demand and supply is poised to aggravate this year, prices are poised to remain at high levels.

Major producing countries such as Thailand, Indonesia and Vietnam stand to gain from firm price trends. Countries such as India which are major consumers are likely to pay the price.

High global prices are likely to prove a deterrent as India is likely to become a net importer of rubber this year.

(thehindubusinessline.com)