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India’s rubber imports likely to rise as tyre demand up but rain and COVID-19 hit local supply

India’s imports of natural rubber, which fell to a six-year low in FY21, are likely to rise again as the demand for tyres is rising, while domestic supply is tight because heavy rain and COVID-19 restrictions have hit supply from Kerala, India’s biggest producer of the raw material.

Tyre demand has started picking up gradually from June and is expected to rise further in the months ahead, industry executives said.“As the demand continues to grow, the supply-side challenges continue to be a concern. The industry may resort to import of natural rubber to bridge the gap between supply and demand,’’ Rajiv Budhraja, director general of Automotive Tyre Manufacturers' Association said.

Rubber imports had fallen in the last two years as domestic production improved. With the pandemic throwing the entire industry into disarray, imports in FY21 fell 10 percent to a six-year low of 4.10 lakh tonnes. In 2018-19, imports had risen to a record 5.82 lakh tonnes as local output plunged.

Tyre demand plummeted in April-May as lockdowns were imposed in many states in the wake of the second wave of COVID-19. “The OEM segment showed a massive decline with prolonged shutdown by passenger vehicle manufacturers. From the middle of June, things have started improving and the demand is showing positive traction this month,” said Ashish Pandey, vice president, materials, J K Tyres, adding that the demand recovery is more in the passenger vehicle tyre sector than in commercial vehicles.

The first quarter of FY22 saw weak imports of natural rubber as international prices were high and tyre demand was weak. However, in the last two months, international prices of tyre-grade RSS-3 rubber dropped 22 percent to around Rs 135 per kg, while the Indian tyre-grade rubber variety RSS-4 ruled more or less steady with a marginal drop to Rs 167 per kg.

Clearly, import looks like a better option now as tyre demand is rising. “Post COVID-19, there is more stress on localisation and there is a better understanding between buyer and seller. So, the industry may go for import only to meet the shortage regardless of whether the global price is high or low,’’ Pandey said.

Budhraja expects imports to reach around 4.5 lakh tonnes in FY22.

The pandemic continues to be a factor in rubber production in Kerala, which has a higher test positivity rate (TPR) than most other states. “It has hampered tapping. We lost tapping days in April and May due to rain and lockdown. In the absence of rain, some tapping was possible in June. But there is heavy rain again this month and the pandemic is yet to subside,” said George Valy, president of the Indian Rubber Dealers Federation. He expects tapping to improve by next month, which could increase supply.

The Association of Natural Rubber Producing Countries (ANRPC) has said prices are unlikely to recover noticeably in the short term. Though the demand may strengthen in the US, Europe and India, it is likely to remain soft in China, which accounts for 40% of global rubber consumption, and several other countries, a June overview of the association said.“The disrupted global logistics, abnormally high freight cost, shortage of chip semi-conductors, continuing COVID-19 infections, and poor vaccination rates are likely to continue deterring the demand sector. Possible further strengthening of the dollar could be another deterrent. However, the disrupted global logistics and abnormally high ocean freight cost will continue supporting the domestic NR markets of those producing countries which are net importers of NR,’’ ANRPC observed.

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