Rubber prices are on a downward spiral for the past two weeks. In fact in all the major rubber exporting countries, price has fallen down below the cost of production. Shanghai rubber futures dropped as much as 6.7% to 13,215 yuan, its lowest since October 31, 2017.
Rubber is a cyclical trade. Rubber tree saplings take 7-10 years to mature after which a sticky, cream-like sap is used to produce tyres and other goods. Those in the industry say that major rubber producers will soon be unable to supply sufficient quantities of rubber to tyre factories in China and other importing countries because rubber saplings have not reached the right age for harvesting. Thailand, along with Indonesia and Malaysia, produce nearly 70% of the world’s natural rubber.
Tyre companies, whose major cost comprises of rubber, affecting the margins directly are in a celebratory mood today. Balkrishna Inds rose over 8% to Rs.2247.15; Ceat rose over 4.5% to Rs.1792; JK Tyre rose around 2% to Rs.150 levels but is now in the red; MRF rose 3% to Rs.69,600; Apollo Tyres rose over 4% to Rs.241.10; TVS Shrichakra rose almost 9% to Rs.3430 and Goodyear rose 6% to Rs.845.