Natural rubber consumption drops 8%

Reflecting a serious impact of the global economic turmoil on natural rubber (NR) based industries, the domestic consumption of NR has dropped by 8 per cent on an average during December and January 2009.

Total consumption has dropped to 66,000 tonnes in December against 73,110 tonnes in the same month of 2007, registering a drop of 10 per cent. Likewise the consumption in January has plummeted by 5.7 per cent to 67,000 tonnes against 71,010 tonnes in January 2008, as per a recent estimate of the Rubber Board.

Ultimately this has resulted in a piling up of stock to 241,000 tonnes as on January 31 against 225,000 tonnes last year. This is one of the largest stocks in recent years. According to experts this clearly indicates a serious crisis on the production front of NR as the drop in consumption and piling up of stock will naturally land up in a strong bear phase in the market.

This is mainly due to the current crisis in the tyre manufacturing sector as sales in the original equipment (OE) wing has dropped heavily during last 6-8 months.

According to sources at various tyre companies in the OE segment the drop is around 70-80 per cent in recent months. There has been a serious set back on the export of tyre and during April-December period the drop was 16 per cent compared to the same period of last financial year.

Although the replacement segment is not affected heavily, the trend is not a promising one. The companies have adopted tactics to stop production for 5-10 days in a month citing various reasons like maintenance of plants. Some plants have locked out temporarily in order to tide over the critical period.

So the intake of rubber by the industry has been dropped heavily during last 3-4 months which resulted in the drop in consumption.