Rise in natural rubber price pushes tyre cost

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Butyl rubber costs lead the input cost-push that is triping the growth of tyre industry in the current fiscal, says ATMA. But, since natural rubber (NR) constitutes 42% of tyre rawmaterial, the blow from NR price increase has been the most critical.

The NR cost impact on tyre manufacturing industry in the current year will be enormous as for each Re 1 increase in NR price (per kilo), tyre costs will zoom by an extra Rs 49 crore, says Rajiv Budhraja, director-general, ATMA, in a release.

The current price of NR at Rs 110 per kg is almost 65% more than the average price of Rs 67 per kg in 2005-06. According to Rubber Board data, tyre industry's consumption of NR in 2007-2008 was 4,91,000 MT.

The release, however, does not mention any probability of jacking up tyre prices. While NR prices have increased by 29% in last six months, Butyl Rubber, primary raw material for the manufacture of automotive tubes, has gone up by a massive 134%.

The tyre industry has no option but “hope for softening of oil and steel prices” as the rawmaterial costs are slated to “decelerate the growth momentum of tyre industry”, according to an analysis by ATMA.