Tyre Industry To Bear The Brunt Of Kerala Floods

(Image source: Livemint.com)

According to industry experts, Tyre prices are set to escalate in the wake of Kerala floods from mid-September 2018. All major tyre makers are forced to hike tyre prices as there is a considerable decline of approx. 15% in the rubber production due to the flooding in the largest (Kerala contributes about 85% of rubber production in the country) natural rubber producing state of India. As the situation worsens, the rubber workers have left for their hometowns and rubber tapping is at halt since the last 20 days. This will result in shooting up of tyre prices as rubber shortage is around the corner in the country. Moreover, the import of rubber has also become a costly affair after US Dollar touched INR 70 last week.

The southern Indian state dubbed as God’s own country for its breath-taking beauty and greenery is facing the worst floods in a century. Red alert has been declared in all 14 districts of Kerala amid flooding. It has been estimated that the floods will impact rubber as well as other plantations in the region on a large scale. According to ATMA Director General, Rajiv Budhraja, the rubber production was hit by heavy rains in the month of July, and the situation has deteriorated further in August with flooding of many important rubber producing areas. Major tyre manufacturers including CEAT, TVS, MRF and JK will have to rely on rubber imports as the local rubber output will take some time to rebound. However, increase in import of rubber by India will help support global rubber prices and the shipments from Indonesia, Vietnam, Malaysia and Thailand will surge.

Economic analysts believe that one out of five companies registered at Bombay Stock Exchange (BSE) will be impacted. Further, the impact of flood will reflect in 2018-19 Q2 results for many companies including tyre manufacturing majors. However, it is yet to be seen that how long this impact will remain. One thing that all experts agree on is the fact that among all the sectors, Tyre and Automobile have been hit the hardest by these floods given the monopoly that Kerala has over rubber production in the country. Apollo Tyres will be hit hard as it has two plants in the state.

Managing Director of Equinomics Research and Advisory, G Chokkalingam expressed his views saying that unlike Odisha, Bihar or its other South Indian counterparts, the state of Kerala is not much dependent on agriculture. This will mean that economic losses would not be too high compared to other states.