Conti warns of higher rubber costs this year

Hanover, Germany – Continental AG has warned about its exposure to fluctuations in the prices of raw materials, which it expects to rise in 2018.

The Rubber Group –the tire division and ContiTech – was particularly affected by oil, natural rubber and synthetic rubber prices., Continental said.

This year, the cost of certain types of synthetic rubber “looks set to increase,” the Hanover-based parent group its 2017 annual report.

"If the company is not able to pass the extra costs onto customers, the price increases could reduce Continental’s income by €100 million to €200 million,” it warned.

Continental went on to note the potential impact of stricter environmental requirements, which will apply for the plants operated in China in 2018.

“This could result in the closure of plants, and thus loss of capacity, which could result in price increases,” the company warned.

If prices for natural and synthetic rubber in particular settle down at the level of the second half of 2017 , it could have a positive impact on earnings this year, the German group said.

However, it added, “we currently anticipate that prices, particularly of rubber, will rise again over the course of 2018 as a result of the assumed increase in demand on the global tire-replacement and industrial markets.”

The Rubber Group faced “considerably increased raw materials prices in 2017,” the annual report pointed out.

Overall, the average price of the natural rubber TSR20 for the year increased by 20% on a US dollar basis and 18% on a euro basis, the report continued.

The average price of ribbed smoked sheets (RSS) for the year increased by 22% on a US dollar basis and 20% on a euro basis.

The average price of butadiene, the main input material for synthetic rubber, for the year increased by over 30% year-on-year both on a US dollar basis and on a euro basis in 2017.