Imports to meet rubber demand
The #International Rubber Study Group (IRSG) sees India increasing imports of natural rubber to meet demand while local plantation acreage will remain limited.
IRSG’s Head of Economics and Statistics, Dr. Lekshmi Nair, gives an insight into the Indian rubber market.
Q: What sort of demand do you see as industrialization pace picks up in India?
Nair: India is the fastest-growing emerging economy in the world. The share of manufacturing in Gross Domestic Product (GDP) is expected to increase from the current 15% to 25% by 2025.
India’s commercial vehicle market is expected to grow faster with the increasing infrastructure and manufacturing investments, along with increased focus on agriculture and rural economy growth.
Commercial vehicle production is forecast to grow at an average annual rate of 7% in the next three years and this strong growth in commercial vehicle production will fuel rubber consumption growth in India.
India has the fastest-growing service economy in the world and there is also strong linkage between “services” sector and automobile demand, especially in passenger vehicles.
Q: How would India cope with rubber demand, especially for its auto industry?
Nair: India’s rubber consumption growth exceeds domestic production for both natural rubber and synthetic rubber.
The supply gap in natural rubber is expected to widen due to a slowdown in production in the southern state of Kerala, and there are limited opportunities for further rubber plantation area expansion in this state.
The expected mature rubber area expansion in the non-traditional rubber growing states in the North and North-East is not sufficient to meet the future domestic demand requirements.
The rubber industry in India will continue to rely increasingly on import, especially on South-East Asian producers, for the domestic demand requirement.
For synthetic rubber, the deficit is likely to remain despite increase in domestic production.
Q: How should Indian businesses position in future rubber trade – given that supply will remain limited and rubber plantation acreage growth is not likely?
Nair: More than 50% of the demand requirement of the rubber industry in India is met via imports.
With an expected strong growth in infrastructure development and manufacturing industry, dependence on the international market will grow.
The increasing import demand for natural rubber, both Indian and International tyre companies are more likely to position in futures trade as the supplydemand gap is expected to widen in the future. fii-news.com
