It wouldn't be surprising if rubber prices touch Rs 200 a kg.

Rubber price surge may deflate tyre stocks

Commodity Corner.

Chennai, April 1

The stocks of tyre companies have had a good run this year. Some of the scrips have increased nearly 10 per cent. The run-off has been since sales of commercial vehicles and cars have increased rapidly since January. Also, tyre companies are witnessing a good demand from the original equipment and replacement markets.

But the good run seems to be threatened and it is likely that it may come to a halt this quarter.

This is because tyre companies have already come under pressure as input costs are surmounting. The tyre industry is very cost-intensive beginning from the main raw material – natural rubber.

Besides, other ingredients such as nylon cord or carbon black are all dependant are derivatives of petroleum products.

Natural rubber prices

What is worrisome for the tyre manufacturers is that natural rubber is zooming to fresh high each passing day.

On Thursday, RSS (ribbed smoked sheet) 4 grade rubber, mainly consumed by the tyre companies, was quoted at Rs 157.25 a kg.

In Thailand, RSS 3, the equivalent of India's RSS 4, fetched a record $3.50 a kg this week.

Summer is not in full flow. Even before that, the prices are surging, mainly on hot weather being experienced in countries where rubber is grown. A severe drought in China's rubber growing areas is also compounding the scenario further.

Tapping hit

Reports from the growing areas say that tapping has been affected due to the hot weather. If the current situation is so, one can imagine how things could be in the coming days when the weather will be even more hotter.

Already, there is a talk in the market circles that it wouldn't be surprising if rubber prices touch Rs 200 a kg.

Rubber is the main raw material for the tyre sector and it makes up 42 per cent of the input costs.

A Re 1 increase in the prices of natural rubber imposes a Rs 60-crore burden on the tyre industry as a whole given the annual consumption of nearly six lakh tonnes.

In view of the fact that prices are running up globally, imports against export of tyres don't look feasible.

Crude oil

The other worrying factor is the rise in crude oil prices. Falling dollar and euro have driven crude oil to around $83 a barrel this week. Nylon cord that makes up nearly 18 per cent of the input costs for the tyre is a derivative of petroleum products. As a result, cost pressure on it is also building up. The same holds good for carbon black too.

According to the Automotive Tyre Manufacturers' Association, the prices of tyres will have to be increased at least 20 per cent to square the rise in input costs.

“But that is neither feasibly nor possible,” says Mr Rajiv Buddhiraja, Secretary-General of the association.

This means the tyre companies profits are all set to increasingly come under pressure. Maybe, they are already facing the heat of the increase in the input costs.

In such a situation, it is unlikely that they will report good results in the first quarter of the current fiscal.

Spot rubber gains further strength

Kottayam, April 1

Rubber prices ruled firm on Thursday. In the spot market, it gained strength from the domestic and international futures but the volumes were in extremely thin as it was already in a holiday mood owing to Easter holidays. The market will remain closed on Friday on account of Good Friday.

Sheet rubber moved up to Rs 157.25 from Rs 157 a kg, while the trend was mixed as ISNR 20 and latex finished flat on comparatively less demand.

Futures improve

RSS 4 improved with the April futures to Rs 158.74 (157.04), May to Rs 162.48 (160.39), June to Rs 163.49 (160.64) and July to Rs 161.45 (159.51) a kg on National Multi Commodity Exchange. The April futures for RSS 3 firmed up to ¥335.9 (¥329.3), May to ¥327.3 (¥323.5), June to ¥323.1 (¥317.7) and July to ¥315.3 (¥310.8) a kg during the day session on Tokyo Commodity Exchange. RSS 3 closed at Rs 157.57 (157.17) a kg on Singapore Commodity Exchange (SICOM). Its spot increased to Rs 158.68 (158.05) a kg at Bangkok.

Spot prices were (Rs/kg): RSS-4: 157.25 (157); RSS-5: 155.75 (155.50); ungraded: 155 (154); ISNR 20: 154 (154) and latex 60 per cent: 100 (100).

Carmakers record robust sales in 2009-10

Sandeep Joshi

Maruti achieves unique feat by selling one million cars

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Hyundai, Tata Motors report strong growth

Ford and GM give new fillip to small car segment

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NEW DELHI: New launches in the small car segment and robust economic growth have led carmakers recording impressive sales in the last fiscal (2009-10). While leading carmaker Maruti Suzuki sold over 10-lakh units, making it the first company in India to achieve this feat in a single year, its closest competitors Hyundai and Tata Motors sold over 6-lakh and 3.5-lakh units, respectively.

Maruti Suzuki recorded 28.55 per cent rise in its annual sales, mainly due to spate of new launches and product refreshments that helped the company clock a sterling performance. These included Ritz, all-new Grand Vitara, new Estilo with K-series engine and Eeco.

Similarly, Hyundai recorded a 20 per cent growth during the year. “As we close the financial year it is reassuring to see the market retain its buoyancy which was triggered by the government's timely announcement of the stimulus package and the consequent reduction in interest rates for car finance. These factors positively affected the market and kept demand high over the last year,” said Hyundai Motor India Director (Marketing and Sales) Arvind Saxena.

Tata Motors, which launched all-new Indigo Manza and Sumo Grande MK II last fiscal, recorded its highest-ever cumulative, where Nano sales stood at 30,350 units. Sales of its luxury brand Jaguar Land Rover also continued their upward trend since launch in June last year. New launches, particularly by two US automobile majors — Ford and General Motors — have given a new fillip to the small car market.

Significantly, Ford India, which recently launched hatchback Figo, saw over three-fold jump in its March sales at 9,478 units.

Figo has already got over 10,000 bookings in the last four weeks.

Similarly, for General Motors India, new launches — hatchback Beat and sedan Cruze — besides entry-level car Spark are driving its sales.