The surge in natural rubber (NR) prices has pushed tyre companies to post net losses, instead of the profits they recorded last year. The 22% increase in NR price, runs counter to rubber boards latest predictions, says ATMA (Automotive Tyre Manufacturers Association).
The board had predicted that NR prices will hover around Rs 72 as global economic crisis had dented the demand from consuming interests. But by March-end, the price has touched Rs 84 per kilo. This was only Rs 69 per kilo on March 1. Stimulus packages helped. But the rubber prices didnt, says Rajiv Budhiraja, director general, ATMA. With demand from vehicle makers dipping by as much as 70% in the December quarter, tyre companies were pinning hopes on stimulus packages to revive demand in the replacement market.
During the first three quarters, ATMA--representing more than 90% of the industry- has posted a loss of Rs 29 crore. This is against a net profit of Rs 494 crore in the corresponding period in the previous fiscal.
When NR prices were Rs 72 per kilo in the first week of March, rubber board chairman Sajan Peter had announced that the price will remain in tune with international trends and that there will be no difference from this level till the end of the month.
As futures led the price rally, the local market has not been in keeping with the international trends, according to ATMA. This situation of buyers drying off in view of rise in prices, and their inevitable return early April, was sensed by the local powerful broker-dealer nexus and very easily took the futures sharply up, says Budhiraja.
NR traded volumes have suddenly spurted to cross 1,000 tonne, from average of around 400-500 tonne a day. This has resulted in physical market sentiments firming up. The volatility in prices has acutely hit the profitability of tyre firms.
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