Tumbling Rupee and Soft Crude Prices Offset Rise in Profit Bearings of Rubber Manufacturers

Although the cost of natural rubber has showcased a significant rise by over 25 per cent in the last three months, profit bearings of Indian tyre makers did not witness a prominent high as an outcome of flexible crude prices following weak rupee. Demand fundamentals of natural rubber gained appreciably in August due to abundant demand from China in times of severe trade constraints. As Indian tyre companies are highly dependent on imports of natural rubber from Southeast Asia, the widened demand and supply gap provided opportunities for domestic manufacturers eyeing to widen their profit margins in times of low input cost. However, the anticipated rise in profit intakes have been consequently hindered by soft crude prices as around 45 per cent of the prices of raw rubber are highly influenced by the market dynamics of natural rubber and crude derivatives. With materials like carbon black, nylon tyre twin and artificial rubber being highly dependent on the market trends of international crude prices, dull outlook of crude has considerably contracted the margins of tyre companies. Despite of soft crude prices playing a prominent role in easing the manufacturing cost at several production companies, weak rupee has also been a prime factor behind the drag as stated by the management of Apollo Tyres Ltd and CEAT Ltd.