Rising rubber prices hit tyre manufacturers

Companies in damage control mode; radial prices dearer.

Tyre companies in the country may go for a price hike if natural rubber rates, which have breached Rs 100 a kg, are not brought under control.

Major tyre makers including Ceat, Apollo, MRF, JK Tyres, Bridgestone and Michelin, among others, fear a drop in their profit margins in the March quarter as a result of high rubber prices.

According to the Automotive Tyre Manufactures' Association (ATMA), prices of natural rubber have risen by more than 11.5 per cent since the beginning of the current financial year from Rs 89.79 a kg in April to Rs 100.15 this month. The prices went up by more than 40 per cent in the past two years.

Ceat, the country's fourth largest tyre maker, has already hiked the prices of radials this month. The company officials said if rubber prices continued to rise, it might increase the prices yet again next month.

Arnab Banerjee, vice-president (sales and marketing), Ceat Tyres, said, "There have been wild fluctuations in the base rubber prices in the past few months. We increased our prices once this month and we will wait to see how the rubber prices move in the near future."

Experts said that rise in rubber prices was not common at this time of the year, when rates are supposed to stabilise or fall marginally due to the end of the peak season.

According to R P Singhania, chairman, ATMA, natural rubber prices crossing Rs 100 a kg is a precarious situation for the tyre industry".

According to ATMA, an increase of Rs 5-6 a kg translates into an input cost increase of over Rs 100 for each truck and bus tyre.

ATMA officials added that the industry was faced with an unprecedented 'crisis like situation' due to growing imbalance between production and consumption of natural rubber, and high prices coupled with short supply of natural rubber. "Aggressive push for exports of natural rubber will add to the woes of the tyre industry," they said.

The association has demanded duty-free imports of up to 100,000 tonnes of natural rubber and a correction in the inverted duty structure on natural rubber vis-à-vis tyres in the forthcoming budget.

An official from the country's second largest tyre manufacturer Apollo Tyres said that the company would raise prices by the next month after taking into account the rubber prices.