Rubber, crude fall; tyre firms to gain

The industry is, however, battling stiff competition from Chinese tyres that are flooding the replacement market

The falling demand from China, the world’s largest consumer of rubber, combined with the plunging crude oil prices, is the perfect recipe for a free-fall in rubber prices.

From June to date, RSS grade-4 rubber price (in India) has fallen 20%. International prices (Tokyo rubber futures) have dropped 28%. Adding to the woes, the drop in crude prices has lowered synthetic rubber price. This, in turn, has encouraged tyre makers to increase synthetic rubber content, which will also affect the demand for natural rubber, notwithstanding the low prices.

For tyre makers it’s a win-win situation as replacement market demand remains strong. Meanwhile, tyre makers have hardly dropped prices. On the other hand, they posted stellar profits over the last couple of fiscals and even in the June quarter, though revenue growth was tepid.

That said, the tyre industry is battling stiff competition from Chinese tyres that are flooding the replacement market. Nearly one-third of the commercial vehicle replacement market tyres are imported and has hurt the local industry, both in terms of sales volume and realization.

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