The tyre industry is expecting "not so promising second half" due to rising crude oil prices and the falling rupee which has made matters worse for it as the industry is largely dependent on import of raw materials, a media report said.
"We are facing pressure from both sides. Vehicle sales are down and the operations cost has gone up. It looks like the third quarter will be a difficult one," Ashish Pandey, VP-materials, JK Tyres was quoted as saying by The Economic Times.
In September, a report said the industry would be adversely hit due to estimated lower rubber output by 18-20 percent following Kerala floods. According to rating agency Icra's report, the natural rubber which accounts for 35 percent of the overall input costs in value for manufacture of tyres, is expected to witness considerable shortage. This is due to inundation resulting in pressure on operating margins for tyre manufacturers.
Natural rubber accounts for over 20 percent of Kerala's total area under cultivation and the southern state contributes the largest share of 84 percent of output in the country followed by Karnataka, Tamil Nadu and North-Eastern states like Assam, Tripura, Meghalaya etc.
"We expect the natural rubber output to decline by 1.2-1.4 lakhs MT (or) 18-20 percent fall during FY2019. With the natural rubber being a critical raw material, the sharp fall in output will have consequent impact on the Indian tyre industry. It accounts for 32 percent and 35 percent of total inputs, in volume and value terms, respectively," agency's Vice President (Corporate ratings) K Srikumar said had said.
India is the second largest consumer, consuming 8 percent of global natural rubber output, after China.
Despite India also being one of the key producers contributing to over 5 percent of global output, it remains a net importer.
"During FY2018, India produced 6.9 lakh MT of natural rubber but consumed 11.1 MT, with the supply gap being fully met through imports from Indonesia, Thailand, Vietnam, etc, the agency said.
Imports have accounted for 40 percent of consumption in the last five years and the same is expected to reach 50 percent during the current fiscal with the shortfall envisaged in output.
With inputs from IANS
Firstpost is now on WhatsApp. For the latest analysis, commentary and news updates, sign up for our WhatsApp services. Just go to Firstpost.com/Whatsapp and hit the Subscribe button.
Updated Date: Oct 23, 2018 13:17 PM