Tyre industry skids over stretching rubber prices

Tyre industry skids over stretching rubber prices

The unprecedented rise in rubber prices to over Rs 200 has the Indian tyre industry worried. Apollo Tyres, which came out with results which were below expectations could be just the first casualty, if price rise persists, sources in the industry said.

Although they envisage a dip and consolidation in the immediate future, technical analysts point out that the rubber prices are likely to rise further next year. That could be bad news for the Indian tyre industry.

Mr Anand James of Geojit Comtrade was of the opinion that rubber prices could come in for a small correction to levels of Rs 180 before consolidation and moving up in the months to come. If the global economic momentum picks up and demand for automobiles from South East Asia continues, he did not rule out rubber prices touching Rs 250 levels, 12-18 months down the line.

This is mainly because global rubber production is not expected to rise in consonance with demand and the crude prices are not expected to gravitate lower. Indian rubber prices are expected to hold firm even if rubber imports are further liberalised as global prices are also expected to inch higher, Mr James added.

Output threatened

The unprecedented rise in rubber prices along with its scarcity in the domestic market is threatening to disrupt the manufacture of tyres in the country, the Automotive Tyre Manufacturers Association (ATMA) said.

In an SOS to the Finance Minister, Mr Pranab Mukherjee, ATMA has sought an urgent meeting to resolve the crisis of a magnitude that the industry has never witnessed so far.

“With current domestic prices of rubber ruling above Rs 200 a kg – an increase of nearly 100 per cent over last year's prices – the tyre industry is left with no option but to scale down production,” Mr Neeraj Kanwar, Chairman of ATMA said in a communication.

Analysing the results of Apollo Tyres, Pinc Research have said that natural rubber prices remain a cause of concern. With unseasonal rains taking a toll on rubber output across South East Asia, rubber prices have soared to over Rs 200/kg and the Indian tyre industry has taken 3-4 rounds of price hikes in the current year.

Due to softer tyre demand, manufacturers are averse to passing on fresh price hikes. Although demand pick up is expected, ability to pass on entire cost pressure seems limited, Pinc Research added.

Despite the advent of the peak rubber production season in India, analysts have been pointing to higher rubber prices as production has been falling short of forecasts.

Production fell to 77,500 tonnes in September against 80,000 tonnes estimated by the Rubber Board. The fall was sharper in October when production was 82,000 tonnes against an estimate of 95,000 tonnes.

“It is alarming to note that rubber shortage is taking place during the peak production period in India. The situation is worsening on a day to day basis. To add to the woes of the tyre industry, this unprecedented crisis is being faced at a time when there is encouraging growth in domestic demand for tyres and the Indian industry is fully geared with major expansions and Greenfield projects to meet the demand growth in tyres,” Mr Kanwar said.

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New Delhi, Sept. 14

Domestic tyre-makers are increasing prices by up to 4 per cent this month, citing rising costs of natural rubber and a high demand from the booming automobile industry.

Cos on the ball

According to industry sources, Chennai-based MRF Ltd has already raised prices by 2.5-4 per cent from August 31 onwards, while Apollo Tyres has announced an increase, but is yet to implement it.

Ceat is also expected to follow suit. JK Tyre & Industries expects to raise prices within a week. Mr A. S. Mehta, Marketing Director, JK Tyre, said, "We're watching the market. The increase should be around two-four per cent as well." Apollo Tyres officials said that no price hike has been undertaken as yet by the company.

Since January, tyre makers have raised prices by 10-14 per cent in four stages. A hike in March was due to the increase in excise duties , while the others were on the back of rising natural rubber costs.

According to Rubber Board data, the monthly average natural rubber (RSS-4) prices have gone up 75 per cent year-on-year in August to Rs 179.52 a kg.

In the same month last year, the prices were at Rs 102.50 a kg. From Rs 137.72 a kg in January, rubber prices reached a high of Rs 182.15 in July.

A Delhi-based dealer said that the tyre price rise may not only be because of rising rubber costs, but due to the Government raising the anti-dumping duty on nylon fabric tyres, effective from August 31.

"The nylon fabric tyre import duties have gone up three-four times, which now give more room for the domestic players to increase prices," said the dealer.


Mixed trend in rubber

Kottayam, Nov. 13

Spot rubber showed a mixed trend on Saturday. The weekend session was comparatively inactive as most of the players preferred to wait and watch till the international markets resume trading on Monday after the weekend holidays.

Sheet rubber finished unchanged at Rs 200 a kg in the main marketing centres.

The grade weakened to Rs 200 (202) a kg both at Kottayam and Kochi, according to Rubber Board. Volumes were low.

Futures recover

In futures, the November series recovered partially to Rs 198.67 (196.68), December to Rs 201.50 (199.42), January to Rs 203.50 (201.58) and February to Rs 206.28 (204.52) a kg for RSS 4 on the National Multi Commodity Exchange.

Spot rates were (Rs/kg): RSS-4: 200 (200); RSS-5: 189 (190); Ungraded: 185 (186); ISNR 20: 197 (197) and latex 60 per cent: 131 (131).