Active Stocks
Fri Sep 22 2023 15:58:38
  1. Tata Steel share price
  2. 126.7 -0.86%
  1. HDFC Bank share price
  2. 1,529.2 -1.57%
  1. State Bank Of India share price
  2. 598.1 1.67%
  1. Power Grid Corporation Of India share price
  2. 199.1 -1.34%
  1. Tata Motors share price
  2. 621.1 -0.93%
Business News/ Market / Mark-to-market/  Kerala floods impact: Rubber prices surge, tyre firms seen affected

Rubber prices have surged after staying benign for a long time, which could push up production costs at local tyre makers. With Kerala having a near monopoly on India’s rubber output, incessant rains and flooding this month has left the industry in doldrums. The devastation of acres of rubber plantation is likely to impact production and disrupt supply for some time.

Earlier in the year, when untimely and heavy monsoon showers hampered tapping of rubber during the season, industry experts were doubtful about reaching the estimated output of 600,000 metric tonnes (MT) for FY2019. Although exact estimates of the damage to plantations are yet to be calculated, experts believe the year could be a washout.

The 5% rise in prices since the first week of August is a problem but a bigger one is the looming supply shortage. This may mean that domestic tyre companies may have to import rubber to bridge any supply gap. While this may lead to higher costs, buoyant demand from auto companies could offset the impact of high rubber prices on profitability.

The disruption in rubber supply is unlikely to be tided over soon, as growers would be battling losses in their business as well as personal property. The rubber plantation areas of Idukki and Kottayam have been badly affected by the Kerala floods.

Since international rubber prices are at comfortable levels, tyre companies may not face much inflation in input costs if they have to import more rubber.

Also read | Kerala floods impact: Cement demand, prices to take a hit

Apollo Tyres Ltd said the landed cost of imported rubber despite a weaker rupee is at present less than domestic rubber. If local supply turns out to be worse than expected, then it could also push up international prices.

Also read | Indians make up for the slack in Kerala tourism

Also, tyre companies such as MRF Ltd and Apollo have experienced substantial production losses at their plants in Kerala due to lower employee turnout during the floods.

Also read | Kerala floods impact a fifth of India’s coffee production

Once a comprehensive estimate of the damage to plantations and rubber output becomes available, it will lend a more clear direction to rubber prices and to growers. Meanwhile, if rubber prices continue to trend up, shares of tyre companies may remain wobbly for some time, since rubber makes up nearly two-third of their input costs.

Also read | How the Kerala economy fared before the floods

"Exciting news! Mint is now on WhatsApp Channels 🚀 Subscribe today by clicking the link and stay updated with the latest financial insights!" Click here!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Updated: 24 Aug 2018, 10:05 AM IST
Next Story
Recommended For You
Switch to the Mint app for fast and personalized news - Get App