Natural rubber prices in India hit new low

ERJ staff report (TP)

Chennai, India − Rubber prices have been primarily responsible for the profit margins of tire companies despite a sharp decline in demand from original equipment customers − namely vehicle manufacturers, reported Nandini Sen Gupta for The Times of India.

Although the Indian passenger vehicle industry has been stuck in first gear with car companies offering huge discounts and even taking production cuts to clear dealer inventory, tire companies have more or less reported good quarterly numbers riding on the back of low global prices of its main input − rubber.

Rubber prices started falling from January 2012 and hit a low of Rs 160 (€1.92) per kg in January 2013. Since then, though, it has been on the rise and is now in the range of around Rs 190-195 (€2.28-2.34) per kg which is near the January 2012 price level. Of late however rubber prices have been southward bound again so much so that rubber growers are now demanding an import ban. According to tire industry sources rubber prices are now down to Rs 159 (€1.91) per kg which is around the same level as the January low.

According to the All India Tyre Dealers’ Federation (AITDF) domestic tire prices "despite having dropped in the last month and a half by Rs 30 (€0.36) per kg to Rs 159 (€1.91) per kg; they remain still Rs 10 (€0.12) per kg higher than the international prices". Tire dealers are therefore demanding a price cut since tire companies have in the recent past hiked prices on account of rising cost of natural rubber.

"Two years ago the domestic tire makers brought about punishing tire price hikes during the period when rubber price touched Rs 240 (€2.88) per kg to the tune of 26%-30% for all categories of tires," said SP Singh, convenor AITDF.

"At that time both rubber growers and tire makers benefitted from indiscriminate price rise of rubber and tires. In between, the rubber price has touched a low of Rs 160 (€1.92) per kg in the last 12 months, which now is prevailing at Rs 159 (€1.91) per kg. No government agency has come up with any cogent cost related reason which supports the astronomical rise in the domestic rubber price to Rs 240 (€2.88) per kg and arbitrary hikes in tire prices."

Tire companies for their part say natural rubber is only one of the inputs in tire production. Vikram Malhotra, VP Sales & Marketing, JK Tyres had earlier said, "Natural rubber is not the only raw material that is critical to tire manufacturing. We're importing synthetic rubber and oil and forex fluctuation is beating us with the 20% slide in the rupee. We have taken a big hit in both the first and second quarter due to the forex situation."

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Full story from The Times of India