Tyre manufacturers in India are looking to Southeast Asian natural rubber producers for supply as demand for the commodity increases in the country amidst a slowdown in domestic production, according to industry officials.
The country’s rubber industry is also expected to do hedging and risk management on Singapore Commodity Exchange (SICOM), prices set by which are used as a benchmark for rubber export from Southeast Asia.
“More Indian tyre manufacturers and rubber consumers have been reaching out to Southeast Asian rubber producers to secure supply,” said Tan Tee Yong, Director for Rubber Commodities at Singapore Exchange (SGX), the parent group of SICOM.
He noted that Indian rubber-linked companies have set up offices in the midst of Singapore’s global rubber trading hub, led by major producers.
“The supply gap in natural rubber is expected to widen due to a slowdown in production in Kerala, and there are limited opportunities for further rubber plantation area expansion in that state,” said Lekshmi Nair, Head of Economics and Statistics at the International Rubber Study Group (IRSG).
Noting the growth in demand driven by industrial developments, she said, “The expected mature rubber area expansion in the non-traditional rubber growing states in the north and northeast 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,” said Nair.
India’s dependence on rubber supplies from international market will grow further, added Nair, pointing out that India currently imports more than 50% of its rubber requirement.
For synthetic rubber, the deficit is likely to remain despite increase in domestic production, she said.
With increasing import demand for natural rubber, both Indian and International tyre companies are more likely to position in futures trade as the supply/demand gap is expected to widen in the future.