Friday, December 24, 2010

Duty cut may not have desired impact, but supply to improve

Natural rubber consuming sector welcomed the government’s decision of reducing import duty on natural rubber to 7.5%, which would help in boosting raw material supply in the market. Looking at the price position and availability situation, it will provide much needed respite to the industry.

The government's efforts to cool down the rising natural rubber prices by lowering import duty may not yield the desired results, as consuming sector are unlikely to resort to overseas purchases, as the international prices of natural rubber is more than the domestic price. If, by adding 7.5% import duty on Rs. 223/-, the landing cost of natural rubber will be around Rs 240/- a kg. This will not be an economic proposition for the user industry.

The above scenario is going to prove the forecast made by Rubber4U, during May 2010 and also at IRC 2010, to be coming true.

Read lot more in Rubber4U – 1st January 2011 issue

Thursday, December 23, 2010

NR prices at all time high and Govt cuts import duty to 7.5%

Ahead of Christmas, natural rubber prices have jumped to a new high at Rs. 207.50 per kg at Kottayam on concerns over supply situation which has fuelled the price rise and also a spurt in the international prices, which is currently at Rs. 222.58 per kg.

Trade sources said that usually prices rally ahead of Christmas and it is estimated that going by the current demand-supply situation, the price could zoom even to Rs 222 per kg.

Natural rubber prices are moving in a northward direction for the past few months due to continuous rain in Kerala, which adversely affected tapping. On the other hand rubber prices have gone up in the international market due to increase in demand from China.

According to a government statement on 23rd December, import duty on natural rubber has been cut to 7.5% for shipments up to 40,000 tonnes until 31st March 2011. The duty will be reinstated at whichever is the lower of 20% or Rs20 per kg after that date.

India has imported 143,468 tonnes of natural rubber during April-November 2010, up just 3% on a year ago.

Tyre makers had been demanding the cut in natural rubber duty for over a year as they were struggling to pass on the rise in the natural rubber price to end users.

Despite trading at a record high natural rubber is cheaper in the domestic market and the import duty cut is unlikely to prompt the user industry to sign fresh imports deals.

Read lot more in Rubber4U – 1st January 2011 issue

Sunday, December 19, 2010

Hearing on 10th February 2011

India, the second top consumer and fourth largest producer of natural rubber in the world, is facing a supply shortage, due to which prices of natural rubber rose to record high and is currently trading between Rs 199 & Rs. 203a kg and is believed that it would stay high till February 2011. The tyre industry, the main consumer of natural rubber, is not optimistic of any major relief in rubber prices in the year ahead.

Prices of natural rubber and crude oil have a co-relation as synthetic rubber, a substitute for natural rubber, depends on the price of crude oil. Crude oil prices have risen to around $90 a barrel, and is expected to remain firm.

But any move by the government to cut import duties on natural rubber could change the scenario. The central government’s response to demands for cutting import duty on natural rubber to 7.5% from 20%, will be one of the factor likely to impact prices early next year.

Delhi High Court has asked the central government to file its response to petitions filed by industry bodies in this regard. The case is posted for hearing on 10th February 2011.

Read lot more in Rubber4U – 1st January 2011 issue

Thursday, December 9, 2010

Another blow to tyre industry

Crude oil prices, which is currently at $89.08 (3:49 AM EST – 09.12.2010), seems to have upset the calculations of tyre manufacturers. The tyre companies expect an increase in overall costs, as the rising crude oil prices may make synthetic rubber more costlier, which would be another major blow to the industry.

Currently tyre industry is reeling under the impact of a sharp increase in natural rubber prices. Natural rubber prices witnessing a historic hike in the past few months, currently ruling around Rs 197-200 per kg, the price gap between NR and SR has widened, favouring increased substitution. The higher prices of NR had prompted the tyre industry to substitute it with synthetic rubber. The industry has been sourcing its total requirement of SBR through import. An increase in synthetic rubber prices could force the industry to reduce its consumption.

The tyre industry used 1.01 lakh tonnes of SBR and 91,100 tonnes of PBR during 2009-10. The average PBR prices stood at Rs 160 per kg for the quarter ending December 2010. The industry has projected it to go up to Rs 170 per kg by March 2011. The industry expects a similar increase in the SBR prices also. The average price touched Rs 120 per kg in December 2010 and are likely to move up to Rs 130 by March 2011.

Synthetic rubber will continue to hold an attraction till such time the natural rubber prices undergo a strong downward correction.

Read lot more in Rubber4U – 15th December 2010 issue

Wednesday, December 1, 2010

NR output dips & may cut import duty

In November, NR production declined by 5.4% to 88,500 tonnes, as compared to 93,500 tonnes in the year ago period, due to heavy rain in the key producing region. Cumulative production during April-November 2010 period rose by 2.9% to 5,46,150 tonnes, as against 5,30,900 tonnes in the corresponding period of the previous fiscal, a senior Rubber Board official said.

Natural rubber imports during November rose by nearly 49% to 10,744 tonnes, as against 7,215 tonnes in the same period of the previous year. During April-November 2010, the imports rose to 1,43,468 tonnes from 1,39,321 tonnes in the corresponding period of previous fiscal.

According to the government, rising incomes may help more than double annual car sales to 3 million by 2015, which in turn will boost demand for NR. Prices in India reached a record last month on concern that the low output season in Southeast Asia will worsen a deficit.

India may allow imports of as much as 100,000 metric tonnes at a lower duty to meet surging demand for tyres. The trade ministry has recommended imports at a concessional rate for a maximum of 100,000 tonnes and tax changes on tyre imports. The finance ministry may make a decision after the end of the current session of parliament, which runs to 13th December, said trade secretary Rahul Khullar, in an interview.

Domestic production is not going to increase dramatically, demand is going through the roof because factories are being set up to make radial tyres. The pressure on prices will continue tight through next year, until you resolve the availability issue, Khullar said.

There will be imports in the coming years if there’s no fresh supply and the auto sector continues to do well.

Read lot more in Rubber4U – 15th December 2010 issue