Rubber prices hit tyre makers

Sharp increase in the prices of butile rubber (BR), a synthetic rubber (SR) variety, has impacted the production cost of automotive tyre makers strongly.

The spiralling prices of crude oil and petroleum products has caused a surge in prices of SR, hitting the passenger car sector most. Naphtha is a major input for producing SR.

However, the increasing prices of SR has not diverted demand towards natural rubber (NR), as its prices, too, are surging.

India's consumption of SR has improved slightly during the last two to three years to 26 per cent from 24 per cent with NR making up for the remaining.

This is the average usage ratio for Asian countries where a major chunk of NR is produced. Globally, however, SR makes up for 40 per cent of rubber consumption.

According to Rajiv Budhraja, director general, Automotive Tyre Manufacturers Association (ATMA), the main reason for SR demand is the relatively lower prices of different SR grades, except BR. SR is seen as a better choice for car and redial tyres, too.

Prices of BR, which is commonly used in production of tubes and inner linings of tubeless tyres, have increased to Rs 230 from Rs 160 in 2006-07. This has caused an escalation in the cost of production of tubes and tubeless tyres.

However, prices of the other synthetic varieties have not risen as much. During January-March, the average per kg price of styrene butadin rubber (SBR) stood at Rs 100 while the price of poly butadin rubber (PBR), another prominent SR grade, stood at Rs 99.