Low Rubber Prices: A Boon For Tyre Manufacturer’s
Biswajit Yadav / 05 Jun 2014
The fall in prices of rubber in both domestic as well as in the international market has attracted a huge attention from tyre manufacturing companies. Most of the tyre manufacturing companies shares are currently trading up by anywhere between 40% to 330% from June 01, 2013.
The fall in prices of rubber in both domestic as well as in the international markets has attracted a huge attention in tyre manufacturing companies. Natural rubber (RSS-4 grade) in the domestic market which was trading at around Rs 179 per kg during June 2013, is now trading at a low of Rs 145 per kg. While on the international market, the rubber is currently trading at Rs 119 per kg as compared to Rs 167.7 per kg during June 2013.
Due to bad weather for the fiscal year 2014, the rubber production was down by 7.6% on yearly basis, producing 844000 tonnes for the quarter ended March 2014. Because of low price of rubber in the international market, country has imported a total of 324467 tonnes of natural rubber for the year ended March 2014, reporting a jump of 49.3% as compared to year ended March 2013. As the import was more than the gap of production and consumption, this led the supply to increase in the domestic market and as the international prices of rubber has reduced, the domestic price of rubber fell to the current level.
Currently, the rubber importers as an import duty has to pay Rs 30 per kg or 20%, which-ever is lower. The import of rubber from the international markets is priced at Rs 119 per kg. The difference in the international and domestic rubber price is huge, even when you add the import duty of 20% to the international price, the total accounts to Rs 143, whereas the domestic price of the rubber is Rs 145. The rubber importer will benefit more than Rs 2 on per kg of import of rubber.
As the rubber prices is falling the tyre manufacturing companies are tend to get benefit of this. Tyre manufacturing companies accounts for about 44% of the total raw materials as rubber. And as the rubber prices are falling, the cost of raw materials has come down and this has led the profitability of the companies to increase. Due to this the stocks of the tyre manufacturing companies has rallied in the last one year. The list of companies with return for the month of June is shown as under:
| Companies | 1st June 2013 | 5th June 2014 | Return (%) |
|---|---|---|---|
| MRF | 14900 | 23823.45 | 59.89 |
| CEAT | 108.55 | 465.6 | 328.93 |
| JK Tyres & Industries | 117.9 | 241.5 | 104.83 |
| Balkrishna Industries | 269.35 | 637.95 | 136.85 |
| TVS Srichakra | 180.1 | 524.15 | 191.03 |
| Goodyear India | 261 | 465.85 | 78.49 |
| Falcon | 13 | 18.4 | 41.54 |
| Apollo Tyres | 89.6 | 186.1 | 107.70 |
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