Even though natural rubber prices have dropped 27 per cent in the past one year, tyre manufacturers have neither brought down the prices nor planning to bring it down in the near future.
Natural rubber forms 40 to 50 per cent of the total raw materials needed for tyre production. In October 2013, rubber prices stood around Rs 165 per kg and now it is trading at Rs 120 per kg.
“Production has largely been stalled in the rubber-growing areas of the country as the planters find the cost of production higher than rubber prices. But lower production is not going to trigger the supply-demand dynamics and support prices as international prices are even lower and the companies are importing rubber from Malaysia and Thailand,” Murukesh Kumar, manager, research, Inditrade Commodities, said.
In Malaysia, rubber prices are trading around Rs 88 per kg and Thailand it is around Rs 95. Tyre manufacturers have been importing rubber from overseas due to the price difference between domestic and international rubber. Between April and August this year, the country imported 1,82,395 tonnes of rubber.
However, tyre manufacturers are yet to take a call on any reduction in prices. They have not effected any price correction in the past one-year as well.
“Input costs have come down. But the crude oil prices which impact the other input costs, including synthetic rubber, has softened only recently,” said Swaranjit Singh, director materials, JK Tyre and Industries.
“We are not effecting any major changes in the pricing. Rubber prices are stabilising. The input costs are on a downward trend but operating margins have grown only by two to three per cent due to the marketing, research and development activities taken up by the company,” said Arnab Banerjee executive director, Ceat.
According to him the commercial vehicle segment is very price sensitive and company has been offering discounts and promotional schemes. In the passenger tyre segment, especially in the premium end, there has been price realisation. The content of natural rubber varies from segment to segment, but at an average it is around 40 per cent.
Rajiv Budhraja, director general of Automotive Tyre Manufacturers’ Association, finds that the market has been dull for the past several quarters. “Only the replacement market was growing, the OEM market has been de-growing with the slump in auto sales. Sentiments have improved and the third quarter the sales are generally better,’ he said.
According to Budhraja, the commercial vehicle segment has bottomed out and six to eight per cent growth is expected in the passenger vehicle segment. He finds that subdued rubber prices have given Chinese, Thai and Korean importers an edge over the domestic manufacturers.
“The prices are lower in Thailand and Malaysia and countries like China are also incentivising the sector to manufacture and export,’ he added. Tyres imported from China, Thailand or Korea are 20 to 25 per cent cheaper than the Indian tyre brands and these account for 20 per cent of the domestic consumption in the passenger tyre segment and around 15 per cent in commercial vehicle segment.
– mydigitalfc.com
