The latest decrease in the price of natural rubber (NR) may ease the pressure on the ailing tyre industry. The industry sees the drop in the prices of NR, the main raw material, as a positive sign in the light of very thin profit margins.
The price of benchmark grade RSS-4 dropped to Rs 202 a kg on Wednesday from the recent high of Rs 225 a kg. The price dropped below the Rs 200-mark and was quoted at Rs 197 a kg last week. It regained momentum on the back of news of an increase in overseas demand. The global markets are quoting above the domestic prices. Bangkok on Wednesday quoted Rs 213 a kg for RSS-4.
So, there may be some delay in the next round of price increase by the tyre sector. Thanks to the increase in the price of raw materials, especially NR, synthetic rubber and carbon black, a price increase has been on the anvil.
In a recent press conference, Neeraj Kanwar, vice-chairman and managing director of Apollo Tyres, said a price increase is essential as the industry was under a lot of pressure. An easing NR price may postpone the rise. A S Mehta, director (marketing), JK Tyres, said the market is not buoyant due to factors like the overall slowdown and lower economic growth. There is heavy pressure for the next quantum of price increase, but the drop in NR price is a positive signal. “We will see how the festival market reacts and then take a decision,” he added.
Tyre prices have risen seven-eight per cent in the last four months. Mehta said the increase in the cost of other raw materials also cause a serious threat to the profitability of companies. It is likely that some companies would be in the red by the end of this financial year.
Industry sources told Business Standard tyre prices might not change for the time being, because of the slowdown in the Western economies. “Apart from the original equipment (OE) segment, there were signs of a drop in the sales in the replacement segment. So, I don’t think there would be an immediate increase in prices,” Mehta said.
Pressure is also mounting due to the sharp increase in the import of tyres, he added.
The price of rubber is also likely to ease in the coming weeks as the main production season is ahead. According to traders here, supply would increase by the next month as the peak production season commences. Nearly 45 per cent of the total production is carried out during October-December. In July, production increased to 62,700 tonnes, a growth of 7.2 per cent.
