Natural rubber growers are feeling the pinch of muted automobile demand as the tyre companies’ intake of the raw material has come down in September.
It is reported that there has been around 50 per cent drop in natural rubber procurement by tyre companies in September so far. Five major tyre companies have reduced their purchases following the subdued demand in the vehicle sector, growers told BusinessLine on the condition of anonymity.
The average monthly consumption of rubber by the tyre industry is in the range of 55,000-60,000 tonnes. Of this, around 30,000 tonnes come from imports and the remaining from the domestic market. This domestic procurement has come down and the situation is likely to worsen unless the government takes some proactive steps for the revival of the automobile sector, sources said.
They attributed the lower intake from the domestic market to the production cut adopted by tyre manufacturing companies and piling up of stocks due to higher imports. The industry’s lower consumption may lead to a price drop in the near term from the present level of ₹134/kg for RSS IV grades, sources added.
Stating that the demand for rubber has come down due to recessionary trends, PC Cyriac, president of Infam (Indian Farmers Movement), said: “We are hopeful that the demand will pick up following the incentives and packages announced by the government for the sector's revival. We hope that the downward slide will be controlled and the things will be better. However, the muted demand in the industry may have an impact on the Rubber Board's production assessment of 10 lakh tonnes for FY20.”
On the lower intake of raw material, he said the industry is very careful of inventory management. They may reduce their intake for the time being. It is expected to pick up once the situation improves. Commenting on prices, Cyriac said: “It all depends on the international market prices and the trend will reflect here, if there is any improvement in the overseas markets.”
Meanwhile, Rubber Board officials maintain that there has been a 6.4 per cent growth in production during April-July compared to the corresponding period of the previous year. The production in July was 60,000 tonnes against 46,000 tonnes in the corresponding month of last year. The rise in production was due to substantial increase in rain guarded area by about 38,000 hectares which led to an uninterrupted tapping in the rainy season.
As per the figures available with the Board, the natural rubber consumption in July has come down to 95,000 tonnes compared to 98,000 tonnes in the previous month.