India’s natural rubber imports from Cote d’Ivoire surge: Are Indian tire cos shifting rubber sourcing to Africa?
Cote d’Ivoire shocked all Asian major suppliers of natural rubber by grabbing 28% of the total quantity of natural rubber imported by India during May 2022. If imports of block rubber (Technically Specified Rubber or TSR) alone are accounted, Cote d’Ivoire represented 37% of India’s imports in May 2022 by leaving behind the dominance hitherto enjoyed by the Southeast Asian major rubber producing countries as India’s trade partners in sourcing natural rubber (Please see the following two tables showing the total import from Jan to May and during May).
Together Indonesia and Vietnam had accounted for 51% of India’s total imports of TSR during the full year 2021. Based on the quantity of TSR imported during May 2022, the combined share of Indonesia and Vietnam fell to 20% while Cote d’Ivoire increased its share to 37%.
Almost 100% of India’s imports of natural rubber from Cote d’Ivoire are in the form of block rubber (TSR) because cup-lump and other primary forms of natural rubber belonging to HS400129 are not permitted to be imported into India (Please see the figures from the following table).
As a suppliers of block rubber (TSR), Cote d’Ivoire offers considerable cost advantage over Southeast Asian producing countries. This is evident from the unit value of TSR (400122) imported in May 2022. Please have a look at the unit CIF value of TSR imported in India, in US$ per 100 kg):
The above comparison reveals that the unit value of TSR imported from Cote d’Ivoire is 11% lower compared with that from Indonesia and 9% lower compared with Vietnam.
While Cote d’Ivoire grows itself as a major global supplier natural rubber at competitive prices, the Southeast Asian producing countries would be under further pressure to squeeze the profit margin and optimize the cost, in their attempts to offer rubber at rates matching with Cote d’Ivoire. The availability of low-cost rubber from Cote d’Ivoire can provide the Indian auto tire companies the additional bargaining power to negotiate with SE Asian suppliers and thereby get natural rubber at the lowest possible rate.
?Will the low-cost rubber available in Cote d’Ivoire can emerge as a potential resisting factor to the natural rubber prices in Asia? Given the present size of the natural rubber industry in Cote d’Ivoire and its relative share in world export of natural rubber, there are well defined limits for the country to influence the global rubber prices to a considerable extent as of now.
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?Indonesia used to be the main source of natural rubber imported into India over years. It was largely due to cost-advantage that Indian auto-tire companies had given preference to Indonesia.?But Indonesia seems to have lost its cost advantages over the past couple of years. Several TSR factories have gone bankrupt or discontinued operations as they could not withstand the financial damage caused by the pandemic. The average yield from rubber trees in Indonesia has been impacted by the incidence of the Pestalotiopsis fungal leaf disease that affected nearly 0.4 million hectares of rubber trees in the country, poor maintenance of holdings due to the resource-poor condition of the farmers, and large presence of senile trees. ?The resultant acute shortage of raw material (Such as cup-lump) compels block rubber (TSR) processing factories to buy cup-lump from farmers by offering premium prices. To absorb the higher cost of raw materials, block rubber processing companies are compelled to quote higher export prices for TSR. As Indonesian natural rubber becomes more expensive, it provides opportunity for Cote d’Ivoire to capitalize on its cost advantage and increase its exports to countries including India (The following table shows the extent of decline in India's imports from Indonesia).
The shortage of cup-lump faced by Indonesian block rubber processing factories and closure of several processing factors are reflected on the country’s exports of natural rubber. Total exports of natural rubber (Including compound rubber and mixture of rubber) came down to 2.8 million tonnes in 2021 compared with 3.3 million tonnes in 2017. The total quantity of exports during the first five months of this year (938,000 tonnes) is down 13% from the same period a year ago.
Vietnam also gained from India’s lower imports from Indonesia. India’s imports of natural rubber (including compound rubber) from Vietnam increased by 42%, year-over-year, during Jan-May 2022 (The following table shows the increase in India's imports from Vietnam.
Compound rubber increasingly constitutes a significant share of India’s import of rubber from Thailand and Malaysia. Of the total quantity of natural rubber and compound rubber imported into India during Jan-May 2022, compound rubber accounted for 39% in the imports from Thailand and 32% in the imports from Malaysia (The increasing significance of compound rubber in India's imports from Thailand and Malaysia is evident from the following two tables.
I am not drawing any conclusion. We need to monitor the trends for a few more months before drawing valid conclusion. Let us debate on Indonesia's dwindling share in India's imports as well as in the world exports of natural rubber. Let us explore how Indonesia changed from a low-cost region to the highest-cost region in natural rubber supply. Let us help each other to identify the factors that enabled Cote d'Ivoire supply natural rubber to India at costs lower than all Asian countries, including Myanmar.
We have seen Malaysia falling from the world's largest producing country to the sixth position over the past four decades. While Cote d'Ivoire emerges as a major producer of natural rubber having globally competitive cost advantage, the survival of natural rubber supply in the traditional Asian producing countries inevitably calls for reorientation of priorities by emphasizing on competitiveness in cost, quality, and green protocols. India's imports during May 2022 could be early signals of an emerging major geographical shift. It is too early to conclude.
Jom Jacob ([email protected])
CEO at Contec ?? bringing circularity to the tire and rubber industries with a protected pyrolysis solution
2 年Interesting information. Thanks for sharing.
Head of Office Management Program at Hoa Sen University
2 年I heard EU buyer & India factory to buy lots of rubber block from Africa in 2019 season.
Gerente Técnico Comercial na Hevea Tec
2 年Similar phenonenon happening with Latin America. Imports from Ivory Coast surging. Great post Jom Jacob!
Captain - Rubber Band || Views are personal
2 年Jom Jacob this trend started in 2018 as Indian tyre majors realized that the quality was comparable while price was cheaper. But its not the 10% as you indicated in your post. You need to adjust it for sales timing and transit time. C?te d'ivoire is sold quite forward & has 45 day transit to India while Asia sells largely spot and is roughly 15 days away. But now with more and more tire companies looking at C?te d'ivoire that price gap with SIR has reduced.
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2 年Thanks for the valuable information,