Rejecting the demand of tyre manufacturers to ban futures trading in rubber, Managing Director and CEO of National Multi Commodity Exchange of India (NCME) Anil Mishra has urged tyre-makers to actively get involved in the futures market rather than keeping away from it.
“Not many from the tyre industry are seen taking the calculated method to recover their costs and participate in the futures trade in rubber. Instead of doing so, they are blaming the futures trading in the commodity as one of the key reasons for price escalation, which is not correct,” he said. It was surprising that the industry that champions that cause of liberalisation and market reforms is arguing for ban on futures when it came to natural rubber, he added.
Replying to questions raised by the Automotive Tyre Manufacturers’ Association (ATMA) before the Forwards Markets Commission on the issue, NMCE has explained that it was the shortage of rubber supply that has led to rise in prices of tyres. “The global rubber consumption is rising at a rapid pace with supply side being constrained on unfavourable climatic conditions, the tyre makers across the world are crying foul over the rising input costs of the key ingredient for the industry, rubber. This causes them to raise the prices of their final products thereby adding to the inflationary pressure in the economy,” he said.
Asserting that futures trading in rubber were totally transparent, Mr. Mishra said: “Many of the tyre companies feel that if they buy in NMCE they would fuel the price, as they are big players constituting about 60 per cent of the total market. The truth is just the opposite… if the tyre companies would buy in physical markets it gets known immediately and it fuels the price because each market centre is very small and the demand gets multiplied because same order flows through many suppliers and gets released one time.”
“On the contrary, in NMCE it remains secret, market is national, participants are many and small size orders could be placed at different times throughout the day for 7 hours. Even if tyre companies were not buying their suppliers were buying in the NMCE future to hedge their sales position with tyre companies. His strategy is thus playing out on futures market rather than that of tyre companies,” Mr. Mishra added.