RJA March-April 2013 Country Focus

Rubber Journal Asia Country Focus

Indian rubber sector: looking into the future with a 2020 vision Emerging market India has worked out its

population. Thus, it has a sufficient domestic consumer base for its locally made rubber products.

Overall, India has become a favourable bailiwick for manufacturing a wide array of rubber products, which currently number AIRIA President Niraj Thakker around 35,000 different says the country’s inverted types. duty structure is creating an Resilient to a volatile uncompetitive market environment natural rubber (NR) market, the fourth largest producer and second largest consumer of NR in the world has posted an increase in production and consumption of NR for this year at 970,000 tonnes from last year’s 920,000 tonnes, according to the India Rubber Board.

To date, the Indian rubber industry has a large concentration of plantations in the southern state of Kerala. Both the Government and the Indian Rubber Board are implementing measures to expand the production to the North East, including Tripura.

Meanwhile, the Singapore-based International Rubber Study Group (IRSG) forecasts that India will be basking in huge demand for NR until 2020, fuelled by a rising demand from the tyre sector. Also by the same year, rubber consumption by the domestic tyre industry will be estimated at 1.4 million tonnes of NR and 0.6 million tonnes of synthetic rubber (SR). Market research firm JD Power Asia Pacific indicates that by 2020, India will become the third largest market in the world after China and the US for light vehicles, including passenger cars and light commercial vehicles (LCVs).

However, rubber production may not be able to keep up with the demand, and by 2020, the supplydemand gap would have widened by over 1 million tonnes, said IRSG. To ease the projected shortage, importing the polymer will be inevitable, but the current high import levy on raw rubber and low customs duty on finished rubber goods may cause a regress in the industry.

Currently, import duty on raw rubber ranges between 20-70%, whilst imported finished goods from neighbouring countries are only imposed a 10% duty. According to the All India Rubber Industries Association (AIRIA), the inverted duty structure is creating an uncompetitive market environment, especially for Micro, Small and Medium Enterprises (MSMEs), of which 5,000 are in the rubber segment.

economic strategies and these will come full circle by 2020 – the year when all segments of economic metrics, from the GDP to CAGR and exports value, are expected to pull up and outpace developed markets, says Angelica Buan in this report that takes a look at the effect the economy will have on the rubber sector.

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y 2020, India would have become the second largest global player in the rubber sector, after China. It is also being positioned to rank amongst the top three global automotive markets, likely to outpace Japan. Currently, the South Asian country is serving an increasing demand for rubber for its more than 1 billion-tyres/year market segment, as well as its non-tyre segment.

The targets seem doable, since after all, India has got more than what it takes: Rapid urbanisation, which is expected to increase by 35% by 2025; more than half of the population in the workforce; ample number of skilled manpower and certified professionals like engineers; and an estimated 720 million consumer base in the rural areas.

The country has R&D capabilities and testing centres, not to mention access to materials such as carbon blacks, zinc oxide, chemicals and raw rubber.

Its economy, one of the fastest growing at 7.6%, based on 2011-2012 estimates, is youth driven and the market is reinforced by the growing 1.2 billion middle class

India is serving an increasing rubber demand for its more than 1 billiontyres/year segment

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Rubber Journal Asia Country Focus Omnova produces emulsion polymers and speciality chemicals at its Ankleshwar, Gujarat plant, which currently has a capacity of 25,000 tonnes and is planned to increase to 40,000 tonnes. The company exports 10% of the materials produced to the US, Europe and other Asian countries. It has a global turnover of US$1.2 million.

German machine manufacturer and overhauler of used machines, Deguma has been doing business in India for 35 years now, rebuilding and dealing used rubber machinery. Thorsten Orf from Deguma’s sales unit said that because refurbished machines are cheaper than brand new ones, demand has been brisk.

According to Orf, European and German-made machines are refurbished in Germany, then sold to countries like India, South America, Thailand and Indonesia. And whilst the company has found its niche in the Indian market, it has no plans to set up a factory in the country as yet. In the future, the company, which posted an estimated EUR7 million turnover in 2011, plans to increase exports and introduce products into the local market, said Orf, who also opined that breaking into the Indian market is price intensive, and therefore, not easy.

Netherlands-based VMI Group, which showcased its Germany-made retreading machinery and gear pump systems at the show, said that it supplies its machines, which are used to manufacture rubber tyres and automotive rubber parts, to major Indian tyre companies.

Gerry Pol, VMI’s Sales Manager for Technical Rubber Industry, said the firm had a 10% growth in 2012 in Southeast Asia, China, India and Brazil. VMI, a subsidiary of the EUR1 billion TKH Group, has set up a business centre in Malaysia to handle the Asian markets, but has no plans to expand into India. Pol also observed that the growing Indian market, especially the automotive segment, is “more quality-conscious”.

Maplan, an Austrian-based manufacturer of rubber injection moulding machines, is also not setting up a facility in India although it has been operating a marketing and sales office in New Delhi for two years now.

According to the company’s President/CEO Dietmar L. Morwitzer, Maplan is looking at increasing exports to India, which currently gains 2% market share in the firm’s total output, and also introducing new products into the market.

Demand for Maplan’s products is greater in Asia than in other countries. In India, customers demand for quality parts, reliable supply and the best price, he said.

Morwitzer also mentioned that Maplan has achieved 15% annual growth in China, Malaysia, Thailand and Vietnam; and anticipates an average turnover of EUR47 million for 2012, an improved figure from the posted turnover of EUR40 million in 2011.

At the IRE, the company showcased its latest rubber Injection technology, with features like less energy consumption in producing parts and reduced cycle time for faster production.

One of the exhibitors at IRE, German chemicals firm Lanxess was displaying its solutions for the tyre market

Vote of confidence from exhibitors at IRE ssues confronting the industry signify that it is yet to reach its potential. Nonetheless, during the recently concluded India Rubber Expo (IRE) held in January, an estimated 550 local and international companies participated to market, network and tap opportunity leads.

Exhibitor Wacker Metroark Chemicals, an Indian silicones subsidiary formed with Germany-based Wacker Chemie and Indian firm Metroark in 1999, focuses exclusively on serving local clients. It noted that the domestic market is fast growing and whilst the growth rate in Europe is slow, said Aditya Nawalgaria, Marketing Manager.

Wacker Metroark produces silicone rubber products used in various applications, including healthcare, personal care and construction, at its Kolkata plant that churns out a production of several thousand tonnes and is expandable as demand requires, according to the company website. It also plans to set up a technical centre to meet local needs.

The company posted a 20% growth in India, China and Brazil in 2012, whilst Nawalgaria also noted that parent company Wacker posted a turnover of EUR5 billion in the same period. With new expansions and plans to increase exports to India, Nawalgaria mentioned that new products will also be introduced but stressed that support from the national government as well as adoption of new technologies are needed.

Another materials provider Omnova Solutions sees growth in the automotive sector as a key to realising the 2020 vision for India’s rubber sector. Dr Ashok Moodbidri Prabhu, Omnova’s Senior General Manager for Marketing and Technical Services told PRA that demand from the automotive sector accounts for 80% of the firm’s growth while the construction and footwear sectors take up the remaining percentage.

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