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RUBBER STAKEHOLDER NEWS : Rubber growers seek fair price
(Last Updated: 22 Jul 2019)

 

 

Rubber growers seek fair price

The Consortium of Indian Rubber Growers Organisation (CIRGO) has demanded fixing of a fair price for natural rubber to ensure better price realisation.

The fair price should be fixed at 258 a kg, considering the cost of production at 172 and 50 per cent of the COP as suggested by the MS Swaminathan Committee, said George Joseph, Convenor, CIRGO. With natural rubber prices ruling lower than the production cost, the majority of rubber farmers are in deep crisis and the emerging situation has made rubber farming non-viable.

Current prices

Natural rubber prices are now hovering in the range of 138 a kg and the lower price has forced many farmers either to stop tapping or abandon cultivation, leading to a huge drop in domestic production, he said. Johny Mathew, Coordinator, CIRGO, urged the government to restrict rubber imports from the South East Asian nations. Though the government has imposed port restrictions initially, it needs to be re-looked. The authorities should ensure proper infrastructure measures and staffing to curb imports.

According to Santhosh Kumar, joint coordinator, CIRGO, rubber has been classified as an industrial crop and it does not enjoy any protective measures extended to agricultural crops. The only way is to either renegotiate with WTO to bring back rubber to the basket of agricultural crops or impose safeguard duty to protect the livelihood of around 13 lakh growers.

He pointed out that rubber latex is already treated as an agricultural crop and hence all the facilities that an agricultural crop attracts should be made available to rubber growers since the primary produce from rubber tree is latex, scrap rubber and sheet rubber.

High input costs

Rubber being a long gestation crop, it requires huge investments by the grower for seven years before it starts yielding. To sustain the livelihood of growers for a further yielding period of 20-plus years, a fair price and a buyback scheme should be made available along with replanting subsidies provided by the Rubber Board, he added.

 
Published on July 19, 2019

 

By Sharad P Matade

With stable demand outlook and strong credit profile, the domestic tyre makers are expected to make significant investments in capacity addition in the coming years.

With a stable growth in original equipment (OE) and a sharp recovery in demand for replacement tyres, the Indian tyre market is estimated to have grown by 9-11% unit volume-wise and 11-13% tonnage-wise domestically in the financial year 2018-19, according to the credit rating agency ICRA.

The OE tyre segment witnessed a strong demand with a 10-12% growth in FY2018-19, as against a 13.3% growth in 2017-18, despite subdued vehicle production levels in the last six months due to ‘dip in consumer sentiments’ on the back of rise in vehicle costs and softened rural demand, ICRA says.

In the OE tyre segment, passenger vehicle manufacturers faced a tough time in FY 2018-19 when passenger vehicle sales had a mere 2.7% growth, the slowest in last four years, according to the data released by the Society of Indian Automobile Manufacturers (SIAM).

The commercial vehicles sales surged over 17% and two-wheeler sales increased by 4.85% which helped to the auto industry register 5.15% growth across all segments in FY2018-19 over the previous year.
However, SIAM maintains that in FY 2019-20, auto manufacturers will continue to have challenges on account of general elections, transition of BSVI norms and the implementation of new safety norms.

Surge in replacement market

The replacement tyre demand in 2018-19 was also higher than the previous year. According to ICRA, pick-up in infrastructure activities and rising consumption boosted the demand for replacement tyres which is estimated to have increased by 7-9% in terms of unit volume in 2018-19 as against a muted growth in FY2017-18.
However, the demand for replacement tyres slowed since November 2018 due to tight liquidity conditions, but a strong H1 has neutralised the impact.

According to ATMA, tyre production in India had a double-digit growth in H1 2018-19 (see Figures 1-3). Total tyre production in H1 FY2018-19 increased 11% over the same period of corresponding fiscal. Among categories, two and three wheeler tyre production surged 20%, while medium & heavy commercial vehicle and light commercial vehicle segments surged 24% which helped to boost the overall production.

According to ATMA, the Indian tyre industry had posted a growth of 7.5% in FY 2017-18 and an overall growth at a CGRA of 3.6% during the last six financial years ( FY13-FY18).

Boost for tyre exports

According to ICRA, tyre exports have increased at a CAGR of 12% during FY2016-18 aided by favourable demand in overseas markets and increased acceptance of the Indian tyres (especially radials). For FY 2018-19, tyre exports are estimated to have crossed Rs 120 billion, with USA and Germany, the top two markets, accounting for over 20% of total exports.

However, in number terms, overall tyre exports went up by 2% during the first half of FY2019 as against the first half of FY18. Import of cheap tyres, especially truck and bus tyres from China, had been a big headache for the Indian tyre producers, and the unprecedented imports had heavily impacted domestic tyre producers’ business.
However, imports from China declined in the last two years. Truck & Bus tyre imports went down due to the reimposition of the anti-dumping duty and Custom duty on truck & bus radial tyres in FY 2017-18. The Government of India had also announced an increase in the Custom duty on import of radial car tyres to 15% from the earlier 10%.

Raw material prices soften

ICRA says that the raw material prices increased by 3% and 11% during Q2 and Q3 FY2019 respectively, with spike in crude linked input prices. However, with oil prices crashing in November 2018, prices of these inputs have declined in recent months. Price of natural rubber (over 30% of input costs) continued to be low over the past two years, with prices falling by 4% during FY2019.

Commenting on the company’s performance in the third quarter of FY2019, Apollo Tyres Chairman Onkar S Kanwar says: “While our volumes have increased across segments and geographies, the margins were impacted due to the lag effect of the increase in raw material prices, especially crude-based ones, in the previous quarters. Comparatively, this quarter looks better, as the raw material prices have eased to some extent. In the current quarter, we are already witnessing an uptick in demand, and are hopeful of reporting a healthy growth.”

On the supply side, the tyre industry has been facing several challenges. Domestic production of natural rubber meets hardly 54% demand, while the rest is met through imports.

“Tyre industry is raw material-intensive and NR is a critical raw material. Acute shortage of NR has been hitting the industry where it hurts the most. Production planning is in serious disarray in view of volatility in availability of NR in the country,” says K M Mammen, Chairman & Managing Director of MRF Ltd, who was recently elected as Chairman of ATMA.

Bright outlook

The Indian tyre market is always dominated by a handful of domestic tyre manufacturers. The top seven tyre companies are expected to have around 80% of the industry revenues, according to ICRA.
As usual, the replacement market continues to have a bigger demand of around 65% in tonnage and 55% in unit terms against the OEMs segment, and the truck and bus replacements share is much higher at 80%.
The tyre industry revenues grew by a strong 16% YoY during 9M FY2019, aided by volume growth across OE, replacements and exports apart from improved realization with price hikes taken in key product segments. Growing volume in both OE and replacement and rising exports are likely to boost revenues of the industry, ICRA says.

On the margin front, operating and net margins stood at 13.3% (up 60 bps YoY) and 6.2% (up 15 bps YoY) respectively during 9M FY2019. Elevated prices of crude linked inputs had restricted margin expansion amid strong revenue growth. However, with oil prices cooling off in recent months, profit margins in Q4 FY2019 and Q1 FY2020 are expected to be strong although some rollbacks on the earlier price hikes had taken place in Q4 FY2019.
“For FY 2019, the tyre industry revenue growth is pegged at 14-15% with operating and net margins of about 14% and 7% respectively, almost in line with last year. For FY 2020-22, revenue growth is projected at 9-10% with operating and net margins at 14-15% and 6-7% respectively,” says K Srikumar, Vice President and Co-Head, Corporate Ratings, ICRA.

“ICRA expects the domestic tyre demand to grow by 7-9% over the next five years (FY2019-23). With stable demand outlook and strong credit profile, domestic tyre makers will continue to invest in capacities. Based on announcements, the industry is likely to witness a capacity addition of over Rs 200 billion in the next three years,” Srikumar adds.

 

 

Kerala rubber growers form producer firm to make tyres

By:  | 
Kochi | Published: June 25, 2019 1:06:27 AM

Rubber growers in Kerala have got together to form a producer company ‘Integrated Rubber Farmer Producer Company’ (IRFPC) to manufacture tyres.

Rubber growers in Kerala have got together to form a producer company ‘Integrated Rubber Farmer Producer Company’ (IRFPC) to manufacture tyres.

Andreas Hermes Academe (AHA), an NGO based in Germany, will assist the producer company to formulate a strategy towards formation of a professional collective to produce value-added products under the ‘Farmer Producer Company’ (FPC) model, Ajith John, technical and financial expert of the group, said in a communication.

Natural Rubber (NR) prices dropped significantly after 2012 and soon hit levels below cost of production, making rubber farming uneconomical and not remunerative.

“The idea for this concept took root during this period when the realisation dawned that there is no salvation for the growers unless they move up the value chain. We have some successful examples of farmer-led cooperatives like AMUL, among others, which became big brands owned and managed by farmers. Recognising the various issues, the Union government had come up with the concept of FPC in 2002 and subsequently the amendments to the Act in 2013 gave further impetus. These companies, managed and run by farmers themselves, were conceived to be run like companies on the lines of the Companies Act with a professional management towards realising the objectives,” John added.

The communication said the FPC will start off with two and three-wheeler tyre production with an approximate initial investment of Rs 100 crore.

It was felt that unless the FPC is able to produce tyres of its own, it will not be able to deliver the right value to the growers for the produce bought from them or efforts put in by them, John said, adding that FPC decided on two and three-wheeler tyre as the initial step because the category forms 51% of all tyres produced and is seen growing at the rate of 12-13% while the industry is witnessing 5-6% growth.

IRFPC sources said the company has started mobilising capital for its tyre project from rubber growers across the country as shares. Face value of the share is Rs 10 and any rubber farmer who owns shares worth Rs 10,000, could be a member, but for becoming an active member with voting right he needs to possess shares for a value of `1,00,000. However, there is provision to form Farmer Interest Groups (FIG) by forming a group of farmers having 1,000 shares and nominating one of them to cast vote.

The company is now planning to procure a new fully equipped two and three wheeler tyre factory, at one of the industrial estates near Erode in Tamil Nadu, which is under auction.

 

 

 

Indian tyre stocks post negative growth on fall in auto sales

Despite the buoyancy created by the return of Narendra Modi government with a clear majority, the stocks of tyre companies suffered losses in the period of April 15, 2019 to June 10, 2019, thanks to falling profits, drop in automotive vehicles sales, trade war tensions etc.

Following trends on the bourses, the stocks of Apollo Tyres, during the period of April 15, 2019 to June 10, 2019, fell till the middle of May and then picked up in the rest of the period. For the 2018-19 financial year, the company’s net sales increased 18% to close at Rs 172.73 billion from Rs 146.74 billion a year ago. Net profit stood at Rs 6.80 billion for the fiscal.

The company had written off Rs 2 billion on account of IL&FS in FY 2019. However, the rise in the stock price in the second half of the period of April 15, 2019 to June 10, 2019, did not mitigate the losses in the first half of the period. Stocks of Apollo Tyres reported a loss of over 11% in the period.

MRF’s stocks plunged till the end of April before climbing up. The Chennai-headquartered company’s stocks picked up momentum after mid-May. Meanwhile, MRF reported net sales of Rs 40.73 billion in the January-March 2019 quarter, an increase of 5.38% from Rs. 38.65 billion in the same period last year.

However, MRF’s net profit fell 14.91% to Rs. 2.94 billion in the January-March quarter of 2019 from Rs 3.45 billion in the same quarter of 2018. At the end of the period, MRF’s stocks reported a fall of 4.32%.

Stocks of Balkrishna Industries Ltd (BKT) had a steady fall till the mid of May. The company’s stocks moved up on the election results, however, the momentum did not continue and the company’s stocks once again fell at the end of the period. During the period of April 15, 2019 to June 10, 2019, BKT’s stocks had over 18% drop.

Stocks of JK Tyre & Industries Ltd reported over 14 % decline in the period. For the fiscal ended March 31, 2019, JK Tyre’s net profit jumped to Rs 1.71 billion from Rs 633.2 million in the previous year. Consolidated revenue for 2018-19 was at Rs 103.70 billion, up from Rs 83.97 billion in 2017-18.

After having a fall in the first half of the period, stocks of CEAT had a marginal increase in the rest of the period. CEAT witnessed over 14% fall in the period of April 15, 2019 to June 10, 2019. CEAT, for FY 2018-19, reported an increase of 5.98% in its net profit to Rs 2.52 billion from Rs 2.38 billion in the last fiscal.

The total consolidated revenue of the company stood at Rs 69.85 billion in FY19 as compared to Rs 62.83 billion in FY18, registering a growth of 11.2 %.

Stocks of other tyre makers Goodyear India, PTL Enterprises and Modi Rubber also fell 1%, 2.75% and 5.03% respectively during the period of April 15, 2019 to June 10, 2019.

 

 

NR production in India meets just 53% of demand: K M Mammen

 Acute shortage of NR has been hitting the Indian tyre industry where it hurts the most. Production planning is in serious disarray due to volatility in availability of NR in the country, says K M Mammen, Chairman & Managing Director of MRF Ltd, who was recently elected as the new Chairman of Automotive Tyre Manufacturers Association (ATMA).

In an interview to Rubber Asia, he points out that domestic production of NR matches just about 53% of the domestic demand and for the remaining 47%, the industry has no other option but to take recourse to imports.
Imports are in direct proportion to the domestic shortage. As the gap between demand-supply has widened from 417,000 MT in FY 17-18 to nearly 570,000 MT in the last fiscal, more imports have been contracted to bridge the gap. Since domestic NR availability can fulfil less than 55% of the demand, the remaining quantity of NR has to be imported, Mammen says.
Even imports have become tough for the industry in view of punitive taxation, port restrictions on import of NR, slashing of export obligation period for tyres from 18 months to only 6 months etc, Mammen adds.

 

Natural rubber/silica technology could lower truck tire rolling resistance

HANOVER, Germany —  reinforcements producer Evonik Industries A.G. has developed a silica/silane technology for use in natural  compounds it claims could help reduce rolling resistance in medium truck and bus tires.

Evonik claims testing shows using its silica/silane technology could yield fuel savings of as much as 8 percent versus traditional carbon-black reinforced NR compounds while also reducing braking distances, leading to greater driving safety on wet or snow-covered roads.

Silica’s effect on rolling resistance in passenger tires is well documented, Evonik noted, when used in compounding with . It’s claiming the use of its Ultrasil 91000 GR precipitated silica reinforcing filler is “particularly suitable” for use in truck and bus tires.

“So silica/silane technology, especially when used in green tires for buses and trucks with high fuel consumption levels, is making an important contribution to climate protection,” Jens Kiesewetter, Evonik’s head of technical service for rubber silica, said, “and that in anticipation of the recently concluded  agreement on targets for CO2 reduction for trucks.”

Evonik noted that despite its high specific-surface area, Ultrasil 9100 GR is incorporated into and dispersed in the  compound relatively easily. The resulting compound offers improved abrasion resistance, which in turn yields better mileage performance.

This is particularly critical, Evonik said, because of the long distances truck/bus tires cover and the variations in infrastructure they encounter, which subject these tires to particularly heavy loads. Silica-reinforced compounds also improve driving safety through shorter braking distances, even on wet road surfaces, Evonik stated.

“Feedback from the market tells us that demand for green tires continues to be very high, thanks to their advantages,” Bernhard Schäfer, head of rubber silica, said.

“Their use in buses and trucks particularly is still quite new and is attracting great interest.”

 

K M Mammen, Chairman & Managing Director, MRF Ltd, has been elected as Chairman of Automotive Tyre Manufacturers’ Association (ATMA), the national industry body for automotive tyre sector in India. Anshuman Singhania, Director of JK Tyre & Industries Ltd, is the new Vice-Chairman of the organisation.
Established in 1975, ATMA is the most powerful body of the Indian tyre manufacturers representing the USD 8.5 billion automotive tyre industry. The members of ATMA comprise as many as 11 tyre companies, both Indian and international tyre majors accounting for over 95 % of production of tyres in India.
ATMA members include Apollo Tyres, Birla Tyres, Bridgestone India, Ceat, Continental India, Goodyear India, JK Tyre & Industries, Michelin, MRF, TVS Tyres and Yokohama.
In the newly reconstituted ATMA Core Group, Rajat Nangia, Senior General Manager (Replacement Sales), MRF Ltd, is the Convener of ATMA Industry, Public & Economic Affairs (IPEA) Group that looks at developing new markets and increasing export competitiveness of Indian tyre industry.
ATMA Supply Chain & Resources (SCR) Group will now be headed by Roopesh R, Vice President – Procurement, Ceat Ltd. V.K. Misra, Technical Director, JK Tyre & Industries Ltd., a veteran of the industry, has taken over the reins of ATMA Technology, Environment, Safety & Standards (TESS) Group.

 

‘Tyre industry’s claims of rubber shortage untrue’

Statement aimed at paving the way for more imports, say growers

Natural rubber growers have disputed the tyre industry’s claims of a rubber shortage, saying that this was meant to “pave the way for further imports of the raw material”.

The industry’s procurement of rubber below market rates has forced small and marginal farmers to hold on to their stock; this emerging situation has made the industry come out with allegations of shortage, which is not at all true, N Radhakrishnan, past president, Cochin Rubber Merchants Association, told BusinessLine.

According to him, the industry always quoted a price 1-3 per kg lower than the published rates of the Rubber Board for domestic rubber. For instance, the RSS IV grade fetches a price of 129/kg while the tyre makers procure it at 128. Similarly, for RSS V grade, the Rubber Board rates are 126/kg, whereas the industry quotes at 123.

“How can small and marginal rubber growers survive the industry’s tactics when the sector is passing through a critical phase due to uneconomical prices?” he asked. Through this move, the tyre industry is creating an impression of rubber shortage in the domestic market, he added.

At present, natural rubber imports are costly, with a 25 per cent import duty compared to the domestically produced crop. The majority of the growers felt that the industry could help the crisis-ridden domestic sector by purchasing raw material at the rates fixed by the Rubber Board.

Rubber growers have objected to the concerns raised by the Automotive Tyre Manufacturers’ Association (ATMA) over the decline in production, which has led to a widening gap between demand and supply.

On the industry’s demand to raise production, Radhakrishnan said availability is still there in select areas where production started in December-January after the floods. But it was low, in the range of around 75,000 tonnes. However, the situation will change with the start of rains by mid April, which would push up production, he said.

It is true that the majority of planters have discontinued rubber tapping due to summer; but small farmers, who carry out self-tapping, are still continuing for want of money, he added.

This being the lean period, production will be low because of the low moisture content in the soil, official sources in the sector said. Normally this is the time when growers give tapping a break due to drought-like conditions; Production will go up once summer showers set in, they added.

 
Published on March 22, 2019

Allow tyre makers to import rubber at same rate as end users: AK Bajoria, JK Tyre

 We are requesting that until and unless the demand gap is filled, we should be allowed to import natural rubber at the same rate as the end users. Finished tyre is getting imported at less than 10% duty, said AK Bajoria, Director, JK Tyres, in an interview with ETNOW.

Edited excerpts:

What is the extent of the production supply gap in ? Also, how much has  risen?

 

Natural  has been continuously dropping from 8.4 lakh tonnes to 6 lakh tonnes in the last 10 years. There has been a fall of more than 30%. Consumption has increased from 8.72 lakh tonnes to 12 lakh tonnes and 2018-2019 is the first year where production has touched almost one lakh metric tonnes per month of consumption. Earlier, the gap was barely 20,000-30,000 tonnes and today the gap is 6 lakh tonnes. The problem has been compounded by the Kerala floods which happened in Q3. This is where we are at this moment on the natural rubber scenario.

Is the present domestic production capable of satisfying the industry needs? Natural rubber consumption in  is set to surpass the projection of 12 lakh tonnes made by the Rubber Board for 2018-2019. Do you see increased dependence on imports compared to what we have seen so far going ahead?

All these figures that I have given are rubber board figures and we are depending on he imports to meet the demand gap. Gradually, this will further increase unless the incentives are given to grow more rubber. Some initiatives have been taken in the North-East states of Tripura and Assam. The quality of rubber coming from that area is not as good as the rubber which is coming from down south. So, help is needed for the tyre industry. Another two-three things that have happened include the export entitlement which helped the tyre industry to import some rubber at a more competitive price