Tyres: stacked against heavy odds

Font Size

Print

Feedback

Email

Discuss

Save & Share Article

What’s this?

Digg	My Yahoo	Fark
del.icio.us	Newsvine	Reddit

Rate This Article

Rating:  5

The tyre industry, burning the growth tracks from a boom in automobiles, is suddenly feeling short on muscle. That is, essential raw materials like steel cord and styrene butadiene rubber are in short supply. This comes on top of a steep rise in raw material prices. Surely, the road ahead looks bumpy.

One immediate concern, and the one on which the industry has no control, is the limited supply of butadiene rubber.

“Crude oil-prices have touched record highs in the last few days, putting pressure on companies to cut down on input costs of crude-based raw materials like butadiene. Since India does not produce butadiene rubber, we are completely dependant on imports, which is under tight supply, as companies overseas are either going slow on production or have been shut down temporarily to offset losses,” says Rajiv Budhraje, director-general, Automotive Tyre Manufacturers Association (Atma).

Confirms Kaushik Roy, head (corporate purchase), Apollo Tyres, “Availability of butadiene is already low. Now with crude prices soaring, manufacturers are fast shifting from crude to gas to derive butadiene, which is used in polybutadiene rubber (PBR) and styrene butadiene rubber (SBR). Since, the yield of butadiene is far less from gas than crude, the supply has come down substantially.”

What adds to the uncertainty is the short-term supply contracts. According to Kaushik, because of the rising fuel prices, manufacturers now prefer monthly renewal of supply contacts, instead of annual contacts that were in vogue before the last two quarters.

The main raw materials for the industry are natural rubber, petro-based products and steel-based materials. Of these, natural rubber constitutes 42-44% to the total value. Petro-based products like PBR, SBR, nylon tyre cord, carbon black and rubber chemical account for 55-56%, and steel-based products like bead wire and steel cord make up the remaining 5-6%.

“There has been a disruption in raw material supply from major units in Western Europe where plants are being shut down to reduce losses. With Olympics round the corner, even China has seen closure of a large number of small and medium enterprises on environmental issues. Though this is a temporary disruption, in the short term, it will impact tyre production in India and might lead to a further price hike,” says Budhraje, adding that most Chinese players have put the supply contracts on hold.