Natural rubber production fell 3.4 per cent to 86,300 tonnes in October, against 89,300 tonnes in the corresponding month last year. This was the first decline in production this financial year. Growers said, this year, a deficient monsoon and abnormal atmospheric heat had hit production.
The market feels production in November and December would improve. Today, rubber futures for November fell by Rs 1/kg to close at Rs 174/kg, while December futures fell Rs 2/kg to close at Rs 175/kg. As the peak production months of November and December lie ahead, annual production may take a hit of only 5,000-6,000 tonnes. Today, spot prices for the RSS-4 grade were steady at Rs 175/kg. Meanwhile, domestic consumption rose 1.8 per cent in October. According to estimates by the Rubber Board, in October, 83,000 tonnes were consumed.
The gap between the supply and demand of the commodity indicates a substantial mismatch. During the April-October period, natural rubber production stood at 4,82,000 tonnes, while consumption was 5,84,580 tonnes, a shortfall of 1,02,580 tonnes. During this period, consumption rose 5.9 per cent, while the rise in production was just 0.3 per cent. For the April-August period, the gap between production and consumption stood at 91,000 tonnes, while for the April-September period, it rose to 1,06,240 tonnes.
Various industries, especially tyre companies, have to import more rubber to maintain production levels. Though the tyre sector, which consumes about 46 per cent of the production, has been hit, rubber consumption is steadily increasing this financial year. During the April-October period, rubber imports stood at 1,30,966 tonnes, against 99,760 tonnes in the year-ago period. In 2011-12, India imported 2,05,050 tonnes of rubber, against 1,88,387 tonnes in 2010-11. If the current pace of imports is maintained, imports are likely to exceed 2,50,000 tonnes this financial year.
Industry sources told Business Standard it was expected next year, there would be a rise in the production and demand for tyres. The industry, in the doldrums in the first and second quarters, is expected to fare better from the third quarter. The demand for rubber would rise and imports would be the key, said an industry expert. As global rubber prices are low compared to domestic prices, India can import rubber at low rates.