The current fiscal year in India is witnessing a notable disparity between the production and consumption of natural rubber (NR), coupled with subdued prices prevailing in the global market. This situation is anticipated to drive the country's imports of natural rubber to unprecedented heights.

In recent years, the rate of NR consumption has outpaced its production, leading to an increasing reliance on imports to bridge the widening gap. Notably, in the fiscal year 2022-23, while NR production amounted to 839,000 tonnes, consumption soared to a staggering 1,350,000 tonnes.

During this period, a significant breakthrough was achieved as the output crossed the 800,000-tonne mark, a feat attributed primarily to higher yields from northeastern states. As a result, imports experienced a 3 percent decline, settling at 530,000 tonnes.

However, the current fiscal year presents a distinct outlook. Traders and manufacturers in the rubber product sector anticipate consumption to surpass 1,400,000 tonnes, while projecting that production levels will remain consistent with the previous year. Given this scenario, imports are expected to soar to approximately 600,000 tonnes.

Ramesh Kejriwal, President of the All India Rubber Industries Association (AIRIA), stated, "We anticipate consumption to grow by 10 percent this year. The automobile sector is flourishing, and the rubber industrial goods manufacturing sector is also performing well." This robust growth projection contrasts with recent reports predicting a global decline in NR demand for the current year.

Despite the increasing dominance of electric vehicles (EVs) in the automotive sector, Kejriwal believes that the growth in NR consumption will maintain a steady 8-10 percent trajectory in the years ahead. The projected weakening of global NR prices in 2023 due to an anticipated surplus production is expected to bolster NR imports to India.

Earlier this year, the Association of Natural Rubber Producing Countries (ANRPC) reviewed its forecast, predicting a 2.7 percent expansion in NR output, reaching 14.916 million tonnes. In parallel, it anticipated a marginal dip in demand by 0.4 percent, resulting in a total of 14.912 million tonnes.

WhatNext Rubber Media foresees an excess of NR production from September to December 2023, which is likely to exert downward pressure on prices as market participants adjust their positions to accommodate the surplus. The slow post-pandemic economic recovery in China, a major player accounting for 42 percent of global NR demand, along with potential interest rate hikes, geopolitical uncertainties, and trade tensions, are anticipated to contribute to a cautious market sentiment.

However, factors such as robust stimulus measures by China to boost demand, production shortfalls due to El Niño impacts, and potential interest rate reductions in the US can potentially alter this landscape.

Kejriwal asserts that the growth in NR consumption will persist at an 8-10 percent level in the foreseeable future, despite the reduced usage of rubber in the EV-dominated automotive sector. He notes, "The reduced consumption of NR in electric vehicles will be compensated by increased usage in other sectors."

In the quarter ending on June 30, 2023, both NR production and consumption in India displayed marginal growth. Production recorded a 0.7 percent increase at 139,000 tonnes, while consumption exhibited a 0.8 percent year-on-year growth at 357,000 tonnes, according to data from the Rubber Board. Typically, growth gains momentum in the second half of the year.

The rubber industry in Kerala, the largest rubber-producing state in India, faced challenges due to heavy rainfall in July, leading to disruptions in rubber tapping. Despite normal rubber production levels, market users have voiced concerns about supply shortages.