Rubber Imports by India to Climb to Record on Car Sales

Natural-rubber imports by India, the world’s third-biggest consumer, may climb as much as 10 percent to a record this year as the highest-ever car sales boost demand for the commodity used in tires.

Purchases may climb to about 225,000 metric tons in the year that began on April 1 from 205,050 tons a year earlier, said Rajiv Budhraja, director general of India’s Automotive Tyre Manufacturers’ Association.

Rising Indian purchases may help futures in Tokyo extend a 16 percent rally this year and increase costs for tiremakers including MRF Ltd. (MRF) and Apollo Tyres Ltd. (APTY) The Society of Indian Automobile Manufacturers estimates that passenger car sales will gain 10 percent to 12 percent this fiscal year, extending record monthly sales in January, February and March.

“The growth in Indian tire consumption this year will be around 6 percent to 8 percent as passenger car and commercial vehicle sales improve,” Budhraja said in a phone interview from New Delhi on April 12. “For the economy as a whole, the odds of it going the way of last year’s trend is not there as interest rates are softening, and the monsoon is likely to be normal.”

The Reserve Bank of India, which raised interest rates by a record 3.75 percentage points from March 2010 to October last year to contain price increases, may begin cutting rates in April, Economics Affairs Secretary R. Gopalan said last month.

India’s rubber imports have been gaining in recent months as farmers are holding back supplies in anticipation of higher prices, Budhraja said.

Price Increase

“There has been a consistent, progressive increase in rubber price,” he said. “The 200-rupees level has become like a psychological level with growers, so any drop below this level they tend to hold on to their stocks.”

The benchmark RSS-4 rubber in India was at 198 rupees ($3.83) a kilogram on April 13, 3.1 percent more than a month earlier, according to the state-owned Rubber Board. September- delivery rubber fell 1.1 percent to close at 306 yen a kilogram ($3,791 a ton) on the Tokyo Commodity Exchange.

The natural-rubber deficit in India will widen as increased car sales and tire production boost demand, according to Vinod Simon, president of the All India Rubber Industries Association. The shortage may climb to 511,000 tons in 2014-2015 from more than 100,000 tons in 2012-2013, Simon said last month, basing his view on economic growth of 6.5 percent a year.

“The shortage will progressively widen on account of India’s constraints in increasing the domestic production,” Jom Jacob, a senior economist at the Association of Natural Rubber Producing Countries, said in an e-mail. “There is acute shortage of skilled as well as unskilled laborers.”

Production in India climbed 4.3 percent to 899,400 tons in the year ended March from 861,950 tons a year earlier, while consumption advanced 2 percent to 966,215 tons, the board said. Inventory at the end of March were 230,000 tons, down 20 percent from a year earlier, it said.