Tyre cos worry over rubber supplies

Written by M Sarita Varma | Thiruvananthapuram | Updated: Apr 30 2010, 03:49am hrs
Rising demand has put tyre makers in a precarious situation as on one hand revenues are simultaneously increasing because of increased sales, but at the same time their raw material demand has stretched the already low natural rubber supplies.

With tyre production in the first 11 months of 2009-2010 financial year rising by 17%, purchase divisions of major tyre companies are grappling to meet the fast-expanding raw material needs, especially of natural natural rubber. Some tyre companies have already passed on impact of rising input cost to consumers in January and March and it looks that some are poised to raise prices again in May, Vaishali Jajoo, automobile analyst at Angel Broking said, adding that a way to fight input cost pressure is debottlenecking, which most tyre firms are already doing.

Tractor tyre demand, an indicator of rising purchasing power in rural economy, is the main factor behind increasing tyre production. Production of tractor front and tractor rear tyres went up by 30% and 24% respectively, according to the latest statistics released by Automotive Tyre Manufacturers Association (ATMA).

Tyre production touched 87.8 million units in the first 11 months of last financial year, a growth of 17% over 74.7 million units produced during the same period of previous financial year. Good monsoon this year could translate into better tractor tyre sales making tyre companies worry as to whether they will be able to procure adequate quantities of raw material.

Rubber unavailability is likely to be a big roadblock to the growth momentum of tyre industry, Neeraj Kanwar, Chairman ATMA said.

Tyre companies said that its not just the historic high price of Rs 170 per kg (more than 80% the average price of Rs 95 a Kg in April 2009) thats worrying them, but sheer unavailability of natural rubber that is more critical.

Kanwar said, growers are hoarding rubber and not selling as spot market prices are rising almost daily by Rs 2-3 per kg. Tyre companies have also questioned the natural rubber production data compiled by state-run Rubber Board. Its a mystery why the Board makes supply projections too pink to be true, says Rajiv Budhraja, Director General, ATMA.

ATMA is gearing up to raise the issue of over-optimistic rubber production data at the board of directors meeting on May 12.