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The rubber products industry is looking for a demand boost as cheaper synthetic rubber and declining prices of natural rubber have helped to lower production cost.
While the tyre sector, the largest consumer of both forms of rubber, is facing subdued demand, the non-tyre segment is witnessing a buoyancy in activities.
Also Read: Rubber prices hit 2-year lows but revival hopes keep tyre stocks in the green
Synthetic rubber (SR) prices, which surged with the intensification of COVID-19 and the outbreak of the Russia-Ukraine war, have now declined. “SR has become cheaper because of weak demand the world over. SR prices went up as much as 80 percent after the war started. They have now dropped by 30- 40 percent,’’ said N Rajagopal, MD of Ceyenar Chemicals.
Domestic production up, but imports still needed
Though India’s production of SR has gone up in recent times, the country still imports several grades. India’s SR production is mostly confined to styrene butadiene (SBR), poly butadiene (BR) and some quantities of butyl rubber, while several other varieties, such as ethylene propylene diene rubber (EPDM), polychloroprene and silicon rubber, are fully imported.
“Global consumption of SR has slumped following the continued spread of COVID-19 in China, looming recession in the US, the energy crisis and the Russia-Ukraine war. As a result, the availability of SR grades has improved and prices have dropped, making it easier for India to import,’’ said Shashi Kumar Singh, vice president of All India Rubber Industries Association (AIRIA).
Logistic challenges
This had led to a runaway rise in SR prices. The freight rates have eased and availability of ships and containers has improved significantly now.
“Overall, the situation in India for the non-tyre rubber industry is much better despite funding problems. While rubber components have a GST of 18 percent, there are complaints of some companies charging 28 percent for those that are used in automobile parts. We have demanded the implementation of a uniform GST rate of 18 percent,’’ Singh said.
In the non-tyre segment, a lot of SR-based components, such as oil seals, and extruded and moulded equipment, are used as automobile parts. The footwear and pharma industries are the two other major sectors that use SR.
Also Read: Here’s why rubber prices are heading to the Rs 200/kg mark
Why is demand not picking up?
“The original equipment manufacturer (OEM) tyre sales have been weak and the replacement tyre segment for commercial vehicles has also not done well, probably because of too many holidays,’’ said Rajiv Budhraja, director general of Automotive Tyre Manufacturers’ Association.
“By that time, the current high-cost inventory will be exhausted and we will be able to make tyres with cheaper raw materials,’’ he said.
But consumption is rapidly outpacing supply. In 2021-22, SR production in India, at 485,165 tonnes, saw a 13 percent increase year on year (YoY).
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