The Central Government has enhanced the duty of excise(cess)

News.... The Central Government has enhanced the duty of excise(cess) on rubber under the Rubber Act 1947 from Rs. 1.50 to Rs. 2.00 per kilogram with effect from 1st September 2011

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‘We are not averse to looking outside India, if an opportunity comes up’
September 12, 2011





Mr Koshy K. Varghese, Executive Vice-President (Marketing), MRF. -- Photo: Bijoy Ghosh
Removal of anti-dumping duty on Chinese tyres, which are 20 per cent cheaper than domestic tyres, will vitiate the competitive environment in the Indian tyre industry, says Mr Koshy Varghese, Executive Vice-President, MRF Ltd.

Unfair competition from China, coupled with slowdown in the auto sector, will put pressure on the tyre industry in the coming months, he says.

More from Mr Varghese…

Input costs have gone up in the last one year. How did MRF manage the cost push?

The cost push has been very significant over the last one year with rubber prices going up from Rs 140 a kg to Rs 235. Global prices have also been high. Today, after the recession, we don’t benchmark only against Indian prices.

Managing the cost push has not been easy as one cannot pass on the entire push to customers. This is why the last quarterly results have been dismal. Most tyre companies were in the red.

The industry had to increase prices or else, it would have been worse off. We hiked prices in regular doses, in a calibrated manner. We cannot take high doses as the market is highly competitive. The price hike was between 1.5 and 2.5 per cent. The situation may not change even this quarter because high cost continues.

What about availability of rubber?

Availability issue is probably the reason why prices went up. The pressure would not have been high had there been adequate availability of rubber. When the auto industry got out of recession, there was a lag. There is a 7-year lag between plantation and production. This lag effect will be there for a couple of more years.

Apollo Tyres has acquired land in Laos for rubber plantation… Will you look at such opportunities?

We are not averse to looking outside India if an opportunity comes up. We are always on the lookout in ASEAN and South-East Asian countries where we have a footprint. But it has to make business sense and fit into our overall strategy.

What other challenges do you foresee this year?

Removal of anti-dumping duty on Chinese tyres will vitiate the competitive environment. Chinese tyres are 20 per cent cheaper than domestic tyres. Hence, our ability to increase prices will become even more limited. We are worried about unfair competition. The tyre industry, which operates on very thin margins, will be under pressure in the coming months.

Our demand is also driven by the automobile industry. There is a sentiment drop across the industry. Six months ago, everybody gave figures that were gung-ho. But now everybody has revised growth rates. Who would have known interest rates would go up! We have to wait and watch. The next three months are crucial. One can’t commit even if one wants to. You can have wishful thinking, but the reality is different.

How is your aviation tyre business doing?

We are getting regular orders from HAL and Defence for helicopter tyres. We supply 400-500 units a month, from our Medak plant. This was as a result of a request from the Government of India, as strategically, it was dangerous not to have a domestic manufacturer for tyres. We are also in discussions with the Government for supply of military aircraft tyres.

When will this materialise?

Even our helicopter business took two years. The lead time in such a business is long as making tyres for aircraft is complex as the speed and pressure at which the tyres hit the tarmac is extremely high.

What is your investment and expansion plan for this year?

Investments will be in tune with market conditions. Last year, we made heavy investments at a unit in Medak for passenger car and two-wheeler tyres. It started production eight months ago and is ramping up. A plant in Trichy is coming up. These investments will start yielding results this year.

Most of the expansion this year will be in the truck radial and passenger car segments, which account for 60 per cent of our total revenues. There will be both new products and product substitution. Especially in the case of trucks, where nylon and bias tyres are getting substituted to radial. World over, it is more of radial. In India, radialisation is slowly happening.

Today, most of our sales today is skewed towards domestic market. We also want to focus on exports, which account for 10 per cent of business. That mix will not change overnight. But we would like exports to grow.

MRF witnessed labour unrest in 2010 and 2011… Are you concerned?

There have been labour issues across the country, North and South. Labour issue keeps coming up; it is not industry or region specific. Many times it comes up when labour agreements are due. Things have been amicably settled now and all our plants are running.

Source: http://www.thehindubusinessline.com/companies/article2444553.ece






Rubber Declines as Debt Crisis May Hurt Demand
September 12, 2011





Rubber dropped for a second day as the sovereign debt crisis inEurope raised concern that demand for the commodity used for tires may weaken.

The February-delivery contract fell as much as 1.8 percent to 362.1 yen a kilogram ($4,673 a metric ton) before trading at 363.5 yen on theTokyo Commodity Exchange at 11:29 a.m. local time. Futures dropped 0.2 percent last week.

Oil slid for a third day in New York and Asian stocks fell, extending the benchmark index’s drop last week, amid signs European policy makers are struggling to contain the region’s debt crisis.

“Concerns on European debt crisis dampened market sentiment,” Naoki Asami, head of international department at Kanetsu Shoji Co., said by phone from Tokyo. Volume is “very light” as most investors are on the sidelines, he added.

Officials in Chancellor Angela Merkel’s government are debating how to shore up German banks in the event that Greece fails to meet the budget-cutting terms of its aid package and is unable to get a bailout-loan payment, three coalition officials said Sept. 9. BNP Paribas SA, Societe Generale SA and Credit Agricole SA, France’s largest banks by market value, may have their credit ratings cut by Moody’s Investors Service as soon as this week because of Greek holdings, two people with knowledge of the matter said on Sept. 10.

“More Downside”

In Europe, “things are probably going to get worse before they get better,” Erwin Sanft, deputy head of Asian equities research at BNP Paribas SA in Hong Kong, said in an interview on Bloomberg Television today. “Here in Asia, we’re looking at much more downside for markets. Much larger economies are being drawn into this crisis.”

Rubber has lost 12 percent this year after climbing to a record 535.7 yen on Feb. 18. The European Union is the second- largest consumer of rubber and the U.S. is the fourth-largest, according to data from the Singapore-based International Rubber Study Group.

The market downside is likely to be limited as increasing imports from China showed the demand remains strong, Asami said.

Natural rubber imports by China in August were 200,000 tons, said a statement on the custom agency’s website on Sept. 10. That compares with 130,000 tons in July and 160,000 tons a year ago, according to Bloomberg data.

Natural-rubber inventories rose 3,558 tons to 33,376 tons, the highest since March, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the Shanghai Futures Exchange reported in its weekly report on Sept 9.

China’s passenger-car sales rose 3.3 percent in August from a year earlier to 1.04 million units, data from China’s Passenger Car Association showed last week.

In Shanghai, rubber for January delivery gained 1 percent to close at 34,095 yuan ($5,338) a ton on Sept. 9. The market is closed for a public holiday today.

Rains spread across southern Thailand, disrupting tapping, according to the Rubber Research Institute of Thailand. The cash price of Thai rubber declined 0.4 percent to 141.4 baht ($4.71) a kilogram on Sept. 9, according to the institute.

Source: http://www.bloomberg.com/news/2011-09-12/rubber-declines-for-second-day-as-debt-crisis-may-hurt-demand.html




Tokyo futures fall on global econ, debt worries (Sept 12)
September 12, 2011





TOKYO, Sept 12 (Reuters) – Key Tokyo rubber futures fell nearly two percent on Monday, as sentiment turned bearish on a drop in oil prices, concerns over the global economy and worries about Europe’s deepening debt crisis.

FUNDAMENTALS

* The benchmark rubber contract on the Tokyo Commodity Exchange <0#JRU:> for February delivery dropped 6.5 yen, or 1.8 percent, to 362.1 yen per kg.

* The most active Shanghai rubber contract for January was up 330 yuan to finish at 34,095 yuan ($5,340) per tonne on Friday. Volume stood at 668,824 lots.

* Chinese financial markets are closed on Monday for a holiday, reopening on Tuesday.

* The euro got off to a rocky start in Asia on Monday, falling to fresh six-month lows against the greenback and a 10-year trough on the yen as downside momentum picked up pace after several key technical levels gave way recently.

* Oil declined by about $1 on Monday with a stronger dollar, as investors shunned commodity risk because of Europe’s deepening sovereign debt crisis, while economic gloom dampened the outlook for energy use.

* For top stories on the rubber market and other news click , or

MARKET NEWS

* Big Japanese manufacturers turned optimistic about business conditions in the three months to September compared with the previous quarter, a survey showed on Monday, as a rapid recovery in supply chains and output following the March 11 natural disaster lifted sentiment.

* China’s key commodity imports, including crude oil, copper and iron ore, all climbed in August from the previous month, adding to evidence that demand in the world’s second-largest economy was still going strong despite the economic turmoil in the West.

* Group of Seven finance chiefs pledged on Friday to make a coordinated response to a slowdown in the global economy but offered few specifics and differed in emphasis on Europe’s debt crisis.

* Juergen Stark, the European Central Bank’s executive board member and chief economist, resigned unexpectedly on Friday in conflict with the bank’s policy of buying government bonds to combat the euro zone’s debt crisis.

* Rubber inventories in warehouses monitored by the Shanghai Futures Exchange rose 11.9 percent last week, the exchange said on Friday.

* The Nikkei stock average fell on Monday after Wall Street tumbled.

* U.S. stocks fell more than 2 percent on Friday after the top German official at the European Central Bank resigned in protest of the bank’s bond-buying programme, which has been a major tool in fighting the region’s debt crisis.