21 June 2013 10:01 [Source: ICB]
Imported material becomes more expensive forcing sellers to cut prices amid poor downstream markets
India's import prices of styrene butadiene rubber (SBR) fell below the $2,000/tonne (€1,500/tonne) psychological mark in the week ending 16 June, mainly on poor demand, with price pressures aggravated by the rupee's plunge to record low against the US dollar, market sources said on 13 June.
Demand recovery may not happen soon with sales in the country's automotive industry, a major SBR downstream, continuing to slow, they said. Non-oil-grade 1502 SBR prices fell to $1,990-2,050/tonne CFR (cost and freight) India on 12 June, as the rupee hit an all-time low of Rs58.98 to $1. The Indian rupee has depreciated by about 8% of its value since early May.
"Indian importers are reeling under severe loss due to the weak rupee. The rupee has depreciated, and this is going to add pressure on demand for goods in the economy," an Indian trader said.
While a boon for exports, a weaker currency makes imports more expensive for a country.
In the case of India's SBR market, sellers of imported cargoes are being forced to bring down prices, as the resulting high cost from the rupee's fall have started to deter demand.
Over the past three months, non-oil-grade 1502 SBR prices in India have fallen by more than $450/tonne or nearly 20% from early March, ICIS data show.
The rupee is being battered in the foreign exchange market on concerns about India's economic performance.
"Demand is poor as the economy is not doing well, and auto sales are down. Consumer confidence is weak and overall, the SBR market is not doing well," an Asian SBR maker said.
Downstream tyre makers in the country are operating at reduced average rates of 70-80% because of weak market conditions, industry sources said.
India's car sales fell for the seventh straight month in May, recording a 12% year-on-year decline, according to the Society of Indian Automobile Manufacturers (SIAM). Sales are failing to pick up, even with double-digit discounts being offered by car manufacturers to entice buyers amid the economic slowdown.
India's automotive industry seems to be heading for tougher times, industry sources said. Maruti Suzuki, a major car maker in India, plans to shut its five car production plants in the country for eight days this month to reduce its swelling inventory at factories and dealerships, as well as for periodic maintenance.
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