May 20, 2014 / 4:17 AM / 4 years ago

India boosts natural rubber imports on strong rupee, weak prices

MUMBAI, May 20 (Reuters) - Indian imports of natural rubber are likely to soar over 70 percent in the three months that end in June from the same period last year, as a strong local currency and lower global prices prompt tyre makers to snap up cargoes.

Increased imports by India would buoy international prices , which have fallen around a quarter this year on concerns over economic growth in China and on plans by world No.1 rubber producer Thailand to sell 200,000 tonnes from its state stockpiles.

“Imports could rise above 100,000 tonnes in the June quarter. Tyre makers are aggressively placing orders,” said George Valy, president of the Indian Rubber Dealers’ Federation.

India, which usually buys from Thailand, Malaysia Indonesia and Vietnam, imported 58,346 tonnes in the same quarter last year.

The rupee this week rose to its strongest in 11 months against the U.S. dollar on expectations of robust foreign interest in domestic shares and debt after the Bharatiya Janata Party swept to victory in the country’s elections.

“Imported rubber is cheaper than local supplies even after paying 20 rupees (per kg) duty,” said an official at Apollo Tyres, who declined to be named as he was not authorised to speak with media.

Tyre makers have been paying 127 rupees per kg for imported Malaysian grade rubber, including import duty and freight, against local price of 150 rupees per kg.

Indian prices have recently been supported by a drop in local output, with April production falling 3.8 percent from a year ago to 51,000 tonnes.

“Local production is not sufficient to fulfil demand. In April production fell and even in May production will be lower,” Valy told Reuters.

That comes after natural rubber prices in India hit a five-year low of 138 rupees per kg earlier this month, driving some farmers to curb tapping.

“Many farmers have not been tapping. They can’t recover the cost of production,” said N. Radhakrishnan, a dealer and former president of the Cochin Rubber Merchants Association.

Farmers have also been reluctant to spend money putting rain guards on rubber trees ahead of the monsoon months of June and September. These are typically pieces of plastic that surround a tree’s trunk above the tapping panel.

“The supply shortage is likely to increase after June. If farmers are not putting up rain guards, then they won’t be able to tap during the rainy season even if prices rise,” said Radhakrishnan.

India is the world’s fifth largest natural rubber producer, but its imports have more than doubled in the last few years due to the rapid expansion of its auto industry. They stood at 325,190 tonnes in the year that ended March 31.

Indian tyre producers include CEAT Ltd, JK Tyre and Industries Ltd, MRF Ltd and Balkrishna Industries Ltd.

“Indian imports can support global prices, but local prices will remain under pressure as tyre makers are slashing dependency on local supplies,” Valy said. (Reporting by Rajendra Jadhav; Editing by Joseph Radford)

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