NR TRENDS
India’s increasing preference to
synthetic rubber
– Underlying factors and future Trends
Jom Jacob
Deputy Director (Statistics & Planning)
Introduction
I
ndia occupies a unique status among major
rubber-consuming countries by consuming
more quantity of natural rubber (NR) than
synthetic rubber (SR)1. However, the past few
years have witnessed the consumption of SR in
the country growing at a much faster rate than that
of NR. Against a 3.5 per cent average annual rate
of growth in consumption of NR, the consumption
of SR increased at 13.3 per cent average annual
1
In the total quantity of natural and synthetic rubber
consumed during 2011, the relative share of natural
rubber was 43.6 per cent in China, 35.5 per cent in the
USA and 43.9 per cent in Japan. But, India’s relative
NR-share during the year was 69.3 per cent
rate during the three-year
period from 2009-10 to 201112. This is expected to have
resulted in a marked shift in
the relative proportion of NR
and SR in the country’s total
Jom Jacob
consumption of the two types
of elastomers. This article attempts to analyse
the relative proportion of NR and SR in the total
consumption with reference to the 15-year period
from 1997-98 to 2011-12 and forecasts the future
trends by identifying the key determinants.
Trends in relative NR-share
Analysts by and large until a few years ago were
advocating the view that the country’s relative
RB BULLETIN l VOL.31 l No.1 l 2013
13
NR TRENDS
more pronounced in the
recent years. During the
three-year period from
2009-10 to 2011-12, SR
grew at 13.3 per cent
average annual rate as
against 3.5 per cent rate
registered by NR.
The
proportion
of
NR and SR used in
the
a
manufacturing
product
decided
is
on
considerations
than
Fig 1. Relative share of NR in total consumption of rubber (%)
relative
of
largely
technical
rather
prices.
For a given product,
the flexibility available
NR-share would go up on potential penetration of
for substitution between NR and SR is very
radial tyre in the truck, bus and LCV segments.
much limited because technical consideration
This argument was further supported by the
and desired performance of the product often
view that NR would get preference over SR on
override the economic advantage of substitution2.
economic consideration besides taking potential
It merits mention that the relative NR share has
benefits from NR’s green credentials. But, the last
progressively declined in India in the past 15 years
three-year period has seen the relative share of NR
despite the fact that NR stayed less expensive
losing 3.3 percentage points from 72.8 per cent
than SR throughout the period with very few
in 2009-10 to 69.5 per cent in 2011-12. Tracing
exceptions. Therefore, the fall in the relative share
back further, the 15-year period from 1997-98 to
2011-12 has witnessed a fall by 8.5 percentage
points in the relative share of NR, from 78.0 per
cent to 69.5 per cent (Fig 1).
of NR in India cannot be attributed to substitution
from NR to SR.
The relative proportion of NR and SR in the total
quantity of rubber consumed in a country largely
Underlying factors
depends on the composition of end-products
The shrinking NR share implies that the
manufactured. For instance, the relative proportion
consumption of NR is growing more slowly
of NR will be high if the country produces more
compared to SR. The 15-year period ended 2011-12
NR-rich products such as truck and bus tyres. On
has witnessed a much faster rate of increase in the
the other way, the relative NR-share will be low
consumption of SR as compared to NR. Against a
3.8 per cent average annual rate of increase in the
2
For instance, in spite of a much lower price for NR
consumption of NR, the consumption of SR grew
during 2000 (as compared to SR), substitution in favour
at 7.3 per cent. The faster growth of SR has been
of NR had been marginal.
14
RB BULLETIN l VOL.31 l No.1 l 2013
NR TRENDS
Table 1. Production of tyres of passenger car, truck & bus and LCV
Period
Production of
passenger car
tyre
Production of
Proportion of
passenger car
tyre in the total
truck & bus
of
tyre
LCV tyre
Total production of the
three categories of tyre
(‘000 no.)
(‘000 no.)
(‘000 no.)
(‘000 no.)
1997-98
4,263
8,095
1,903
14,261
29.9
1998-99
4,571
7,913
1,917
14,401
31.7
1999-00
6,054
8,969
1,980
17,003
35.6
2000-01
6,813
8,612
2,108
17,533
38.9
2001-02
7,481
8,474
2,352
18,307
40.9
2002-03
8,544
9,863
2,844
21,251
40.2
2003-04
9,959
10,821
3,271
24,051
41.4
2004-05
11,862
11,092
3,945
26,899
44.1
2005-06
13,605
11,941
4,529
30,075
45.2
2006-07
14,263
12,367
4,820
31,450
45.4
2007-08
16,437
13,137
5,320
34,894
47.1
2008-09
16,570
12,839
5,298
34,707
47.7
2009-10
20,047
14,811
5,739
40,597
49.4
2010-11
26,201
15,668
6,029
47,898
54.7
2011-12
27,141
16,085
6,688
49,914
54.4
Production
(%)
Source: www.atmaindia.org
if SR-rich products such as passenger car tyres
dominate in the end-products3.
Auto-tyre manufacturing industry enjoys a near
total dominance in the consumption of rubber in
India. Nearly 65 per ent of the NR and 73 percent
of SR consumed in the country during 2011-12
was contributed by the auto-tyre manufacturing
industry. Therefore the investigation into the
causes of the falling NR-share in the country’s
rubber consumption invariably has to examine
the composition of auto-tyres manufactured in the
3
NR constitutes 82 to 86 per cent of the total rubber
used in a truck and bus tyre. But, in a passenger car
tyre, NR constitutes only 25 to 40 per cent of the total
rubber used.
country. Table 1 gives the trends in production of
passenger car tyre, truck and bus tyre and LCV
tyre during the period from 1997-98 to 2011-12.
The table reveals a marked shift in the composition
of auto-tyre production in favour of passenger
car tyre. The proportion of passenger car tyre in
the total production of tyres for passenger car,
truck and bus and LCV has increased by nearly
25 percentage points from 29.9% in 1997-98
to 54.4% in 2011-12. Obviously the auto-tyre
manufacturing sector is undergoing a marked shift
in favour of passenger car tyre which absorbs NR
in a much lower proportion as compared to SR.
To be more specific, the changing composition of
auto-tyre production explains the falling relative
share of NR in India.
RB BULLETIN l VOL.31 l No.1 l 2013
15
NR TRENDS
expected in the relative
NR share. Statistical
Relative
NR sha
(Actual
re
and pro
jected)
analysis based on 15
annual
observations
from 1997-98 to 201112 revealed that the
relative
NR-share
Relative NR-share is projected to fall from 69.5% in 2011 to
64.5% in 2020-21
and the proportion of
passenger car tyre in the
country are correlated
in the form of the
following
estimated
regression equation5:
Relative NR-share =
-0.385181 X (proportion
Fig 1. Relative share of NR in total consumption of rubber (%)
of passenger car tyre)
+ 92.56387.
Forecasts of the relative
Future trends in NR-share
NR share have been prepared for the period up
The observed fall by 8.5 percentage points in the
relative NR-share in the 15-year period ended
2011-12 is estimated to have shaved out 118,000
tonnes from the country’s NR-demand every year4.
Therefore, future trend in the relative NR-share
will have important implications for the country’s
demand prospects for NR.
to 2020-21 by using the estimated regression
Future developments in the composition of
auto-tyre production are key to the prospects of
points from 69.5 per cent in 2011-12 to reach
country's trend in NR’s relative share. As stated
earlier, the proportion of passenger car tyre in total
production of tyres for passenger car, truck & bus
and LCVs has increased from 29.9 per cent to 54.4
per cent during the period from 1997-98 to 201112. Exponential smoothing by using the ‘E-views’
software suggests that the proportion of passenger
car tyre would continue the trend to touch 72.9
per cent by 2020-21. This implies that SR-rich
passenger car tyre will gain further dominance
in the composition of auto-tyre production in
the country. Therefore, a further fall can be
consumption, a five percentage fall in the relative
16
RB BULLETIN l VOL.31 l No.1 l 2013
equation. Fig 2 shows the forecasts of the relative
NR share along with the projected values of the
proportion of passenger car tyres for the period
upto 2020-21.
The results suggest that the relative NR-share in
India would continue to fall by five percentage
64.5 per cent by 2020-21. At the current level of
NR-share is equivalent to NR further losing its
domestic market size for SR by an estimated
70,000 tonne every year.
4
India consumed 13.88 lakh tonne of rubber (NR and
SR) during 2011-12. Its 8.5% comes to 118,000 tonne.
5
The regression output gave the following values:
Adjusted R2 = 0.761811, t-ratio of the independent variable = -6.765863, F-ratio = 45.78, DW statistic = 1.46,
Observations: 15 annual figures for 1997 to 2011.