COVID-19 Impact on Rubber in the Chemical and Materials Industry
As the non-tire application of rubber account for more than 50% of the share, a slowdown in demand from those applications has hit the rubber market severely. Also, the decline in imports by top two consumers of natural rubber is also a reason for severe impact of COVID-19 on rubber industry.
IMPACT ON RUBBER INDUSTRY
Though the outbreak of coronavirus has impacted the rubber industry in many ways, it has also brought several opportunities for the rubber manufacturers. At one side, the demand for natural and synthetic rubber has declined, the production has also declined with more than 5%, many production sites are running at 50% capacity and many end-user industries are struggling to receive their raw material (natural and synthetic rubber), on the other hand rubber associations are using it as an opportunity to curb the imports from China and increase their reliance on domestic industry.
As per the Automotive Tyre Manufacturers Association (ATMA), restrictions on import of rubber tyres from China will pave the way for increased domestic production and will also increase the amount of exports along with job creation multifold. ATMA has also revealed that almost 40% of Truck and Bus Radial (TBR) tyres and passenger car radial (PCR) tyres and 75% of tractors tyres in India are imported from China.
IMPACT ON DEMAND OF RUBBER FROM AUTOMOTIVE INDUSTRY
The data presented by ATMA clearly shows that the tyre manufacturing has faced a hit during the end of 2019. As per ATMA, during April - December 2018, the total tyre manufacturing in India was around 14.63 crore which declined to 13.65 during April - December period of 2019. This decline has definitely increased in the initial months of 2020. With the uncertain infrastructure activities, the decline in truck and buses tyre volumes was from 1.58 crore in 2018 - 2019 to 1.37 crore in 2019 - 2020. Two-wheeler demand slipped from 5.47 crore units to 5.11 units. The data is only for 9 months and not for the entire fiscal year. As the impact of COVID-19 was at peak from January 2020, this rate would be much higher.
In an interview, Mr. K Srikumar, the co-head for Corporate Ratings, ICRA Ltd. has clearly notified that in the tyre sector any change in production is due to change in demand. Production and demand both largely coincide with each other. Any impact on one has direct impact on other. He has also mentioned that a large amount of tyre demand occurs from motorcycle or two-wheeler segment. So if this segment faces any downfall in the demand, it will create crisis for the overall tyre market in India. He has also mentioned that trucks which are mostly used to transport goods from one place to other are standing ideal due to lack of economic activities. The rigorous movement of trucks resulted in high replacement rate. But as they are not functioning now, the replacement cycle has extended and thereby, has also declined the demand for tyre replacement. Thus, no new demand either for fresh tyre or replacement tyre is emerging which has pushed the manufacturers to cut down the production.
Mr. K Srikumar has expressed his views, “There can be opportunities for Indian tyre makers in geographies as the U.S. which are largely dominated by Chinese tyres and brands.”