Rubber Futures in Tokyo Rise as Much as 1.2%, Erasing Decline

Rubber Futures in Tokyo Rise as Much as 1.2%, Erasing Decline
Posted: 15 Jun 2010 12:38 AM PDT

June 15 (Bloomberg) -- Rubber futures in Tokyo advanced as much as 1.2 percent, erasing an earlier decline, as crude oil prices rebounded. The November-delivery contract on the Tokyo Commodity Exchange rose as high as 278.1 yen per kilogram, before trading at 277.7 yen at 1:04 p.m. in Tokyo.

(bloomberg.com)





Tyre makers continue to face cost pressure
Posted: 15 Jun 2010 12:37 AM PDT
The three months to end-March turned out to be a bumper quarter for Indian tyre manufacturers. The sharp uptick in demand has allowed tyre makers to improve their operating margins despite being hit by rising raw material costs through rubber prices.

The tyre sector is driven by replacement demand that accounts for close to three-fourth of total sales, with the balance coming from sales to vehicle manufacturers and exports. Within various market segments, tyres for commercial vehicles dominate the overall volumes and the pick-up in industrial activity over the past one year has ensured high demand for truck tyres.

The top-six tyre firms, including Apollo Tyres, MRF and Ceat, together reported a 25% rise in revenues on a standalone basis for the quarter ended March ’10 over the year-ago period, over four times as fast as the growth during the three months to end-March ’09.

Improvement in demand is also visible on a sequential basis with a 10% growth in revenues for these companies over the quarter ended December ’09. This was twice the growth rate in sales in the previous quarter compared to the three months to end-September ’09.

However, the companies faced a big jump in the raw material cost, with the price of rubber almost doubling to Rs 140/kg.

The increase in the cost of rubber that makes up half of the cost of a tyre also pushed up the raw material cost-to-sales ratio to 68% last quarter from a little over half of the total in the same period last year. Despite the hardening raw material cost, companies were able to clock a double-digit operating margin.

Companies were able to generate as much as a 63% jump in aggregate net profit over the corresponding quarter last year. Although high demand lifted operating performance, the bottomline was largely boosted by moderation in non-operational costs, like interest and depreciation.

Rubber prices have been increasing quarter-over-quarter and that has impacted sequential profits. Although the decline in net profit for the quarter ended March ’10 over the previous quarter moderated to 4%, it indicates companies continue to face pressure due to raw material expenses.

Despite cost pressures, investors have taken a fancy to tyre makers, with scrips of top firms outperforming the market benchmark index. All top firms generated double-digit returns for shareholders led by a 32% rise in the price of Apollo Tyre, compared to a 3% decline in the Sensex since January 1.

(economictimes.indiatimes.com)





Spot rubber ends firm
Posted: 15 Jun 2010 12:35 AM PDT
On Monday (14 June 2010), the spot rubber prices were firm as the trend was ridden by the moderate gains in domestic and international futures. Sheet rubber increased to Rs 171 from Rs 170 per kg, while latex 60% flared up sharply by Rs 7 per kg on acute short supply.

The June futures for RSS 4 rose to Rs 172.60 (171.27), July to Rs 168.40 (167.64) and August to Rs 163.40 (162.48), while the September futures ended flat at Rs 158.50 a kg on the National Multi Commodity Exchange.

Spot rates were (Rs/kg): RSS-4: 171 (170); RSS-5: 168.50 (167.50); ungraded: 167 (165); ISNR 20: 151.50 (150.50) and latex 60 per cent: 120 (113).

(indiainfoline.com)





Global rubber prices jump 40pc in 6 months
Posted: 15 Jun 2010 12:33 AM PDT
Global prices of chemical materials and rubber have seen a continuous increase over the last six months, which has now reached 35 to 40 per cent or $1,600 to $2,800 per metric tonne, said a top official.

Despite the increase, Rubber World Industries (RWI), the leading manufacturer of closed-cell rubber insulation Gulf-O-Flex, is aiming to keep its products’ current prices by increasing production by 25 per cent this year, said its chairman Abu Baker Shaikhani.

“The worldwide surge in the prices of raw materials we use for the production of Gulf-O-Flex has driven us further into undertaking an aggressive expansion initiative, which will not only address the heightening demand for rubber insulation products but also allow us to maintain our prices for the benefit of our customers,” said Shaikhani.

“We are also motivated to identify more ways to increase our efficiency as we expand our manufacturing facility, both of which will significantly contribute to our end goal of delivering high quality products at economical prices to the region,” he added.

While market analysts predict a 4 per cent rise in international demand for rubber products per year until 2011, the shutting down of many factories in the region and across the globe is making it difficult for supply to keep up with the demand, and is indirectly spurring the price hike, a statement said.

RWI, part of the international business conglomerate Shaikhani Group of Companies, is reinforcing its manufacturing capacity to cater to the bigger demand and at the same time achieve greater economies of scale, which will enable it to offer its products at their current prices, Shaikhani said.

The company’s plan to increase production this year is part of a broader strategy to produce 3,600 containers per year by 2013, for which it has invested Dh30 million ($81.7 million).

In addition to expanding its manufacturing infrastructure, the company is also working on growing its distribution network.

“Despite the hurdles present in the market as an offshoot of the economic meltdown, we are committed to finding ways to sufficiently provide the required volume of products by our customers and accommodate their price limitations,” Shaikhani continued.

“By doing so, we are confident that we will maintain our leading position in the market and further strengthen the loyalty of our customers to the RWI brand,” he concluded.

(indiainfoline.com)