Rubber Prices To Go Up, Tyre Makers To See Plunge In Margins

indian tyre industry faces carbon black shortage

Tyre rubber prices

 

The natural rubber prices are set to take a shoot of 20 percent, which will directly affect the profitability of the tyre manufacturers across the country as natural rubber is the chief raw material in tyre making.

The whole scenario took a drastic change in a matter of one and a half month as the prices saw an increase of 20 percent after bearing a low for a couple of years. Besides, a surge of 15 percent is also witnessed in the international prices of rubber.

In India, Kerala is the No.1 producer of rubber and, as a raw material, natural rubber bills for about 40 percent cost in making of the tyres to the tyre makers. According to the leading tyre brand Apollo Tyres’ CFO, Mr. Gaurav Kumar, a rupee increase in the price of the natural rubber directly affects the profitability of the tyre industry by Rs 60 crore. Last year, the rubber prices were on an all-time low and now they are projecting recovery (rubber price increase), expected to be accomplished by the coming quarter, he stated.

Tyre manufacturers in the country use a combination of local and imported rubber in the making of the tyre. Recently in Kochi, the RSS-4 grade and RSS-5 grade rubber was priced at Rs 114/kg and Rs 111/kg respectively as per the Rubber Board, the statutory body of India Government.

However, due to cut-throat competition with Chinese tyre brands in the heavy duty vehicle segment, the tyre makers might not pass the price addition to their finished products. The shrink in demand of motorcycles and tractors alongside the majority of the car makers not witnessing growth can be some of the factors that may drive tyre makers to not pass the increase in the raw material cost to their consumers.

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