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FOCUS-Tyremakers to ramp up imports as rubber prices soar

* Indian tyre firms scale up rubber imports

* Indian natural rubber prices near life-high

* Import duty of 20 percent is a deterrent

MUMBAI, Sept 5 (Reuters) - Indian tyre makers are set to scale up natural rubber imports in the next few months to sidestep soaring domestic prices, especially if they do not cool off in the near term, industry officials said.

Prices have jumped about 37 percent since April, according to data available with the Rubber Board. It touched a record high of 142 rupees per kg on Aug 28.

Tyre majors MRF Ltd MRF.BO and Ceat CEAT.BO are already increasing imports against advance licenses. Tyre firms have licenses that allow them to import duty-free against their exports.

Others will call for more imports if prices remain at current levels for another month as rubber accounts for more than 60 percent of the cost of tyres.

“We are importing a lot of rubber...We have contracted nearly 3,500 tonnes, which will start arriving next week from Thailand,” Ceat’s Managing Director Paras Chowdhary told Reuters. Thailand is the world’s largest rubber producer, where prices are ruling at 132 rupees per kg against 140 rupees in India.

“We currently have license for more than 10,000 tonnes of rubber,” Chowdhary said, adding the company will contract more if the domestic price does not come down.

Domestic rubber prices have stayed near 140 rupees per kg since late July despite a rise in production and fall in oil prices.

Rubber production in India, the world’s fourth largest producer, rose 28.1 percent in the first five months of 2008/09 as better prices encouraged planters to tap more.

But not all that is tapped reaches the market.

“Growers are holding back their stocks on expectations of a further price rise,” said Alex Mathews, head of research, Geojit Financial Services Ltd.

If prices do not cool off, more tyremakers will choose to import.

"We are constantly evaluating, and if rubber prices remain high till October then there is a strong case for more imports," said A.S. Mehta, director, marketing, JK Tyre & Industries JKIN.BO.

“We are trying to import to the maximum extent possible against advance prices...but higher import duty is negating the lower international prices,” MRF executive vice president Koshy Varghese said.

India imposes 20 percent import duty on natural rubber.

High costs of rubber have dented margins and profitability of tyremakers.

MRF, the top tyre maker by sales, posted a 25 percent decline in April-June net profit, while the next two, Apollo Tyres APLO.BO and JK Tyre, posted modest increases.

Ceat, India’s fourth largest tyre firm, had a net loss for the quarter. (Editing by Harish Nambiar)

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