Prices of natural rubber in India jumped to a three-year high on Monday on thin supplies and tracking gains in overseas markets due to supply disruptions in top producer Thailand, dealers said.
The rally in prices might increase the raw material costs for tyre makers, thereby, putting pressure on their profitability, as natural rubber makes up more than 40 percent of the cost of a tyre.
The spot price of the most-traded RSS-4 rubber (ribbed, smoked sheet) in Kottayam in the top producing southern state of Kerala jumped by 600 rupees to 16,200 rupees ($238.31) per 100 kg, the highest since January 2014.
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“Supplies have dried up. Farmers are not ready to sell at the current level as they are expecting a further rally in prices,” said George Valy, a Kottayam-based dealer.
Benchmark Tokyo rubber futures jumped 6.1 percent on Monday to hit their highest level since September 2011 amid low inventories in Japan and supply worries in the wake of floods in Thailand, industry sources said.
Shares of Indian tyre companies including Apollo Tyres Ltd, JK Tyre & Industries Ltd, CEAT Ltd and MRF Ltd were trading lower in a flat Mumbai market