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Indian tyre manufacturers look at possibility of buying rubber plantations 06 June 2011

Steep rising costs of rubber means manufacturers are looking at possibilities of raising production levels

Indian tire makers are increasingly looking at the possibilities for buying rubber plantations as they search for ways to rationalise costs. The news comes as Indian tyre manufacturer JK Tyre reported a 71.5% year-on-year (y/y) decline in net profits during the fiscal year (FY) ending 31 March 2011. Net profit declined to 625.5 million rupees (USD13.7 million) compared with INR2.2 billion in the same period last year, with much of the blame being laid at the soaring cost of rubber prices, which account for 40% of the manufacturing cost.

JK Tyre & Industries’ President Arun Bajoria said that the company is “seriously looking” at the opportunities to acquire rubber plantations. Bajoria declined to comment on the details of plantation buyout, but confirmed that the company had enough cash to fund such a deal. JK Tyre is also working on developing a substitute for rubber at its research and development centre, Bajoria confirmed. Meanwhile, Apollo Tyre has said that it was open to the "possibilities of buying plantations".

JK Tyre has said that they will raise tire prices by as much as 6% in June, which the company has confirmed is still not enough to cover the cost of recent raw material price increases. In fiscal 2010, the overall raw materials costs have increased 43%, but JK Tyre has increased prices by 17%, said Bajoria. The surge in rubber prices has affected nearly all global suppliers of tyres, with most having to pass on the costs to consumers through price hikes. Michelin recently announced that it will raise truck tire prices in Europe in July, and in April Yokohama Rubber announced a 15% increase on all export tire prices.

The demand for tires is growing globally but supply is not rising at the same pace. Countries such as China are looking overseas for rubber cultivation rather than acquiring rubber plantations. Global natural rubber production was forecast to rise to 9.936 million tonnes in 2011, lower than the previous estimate of 10.025 million tonnes, industry group ANRPC said last week.

Buying rubber plantations is likely to help tire makers ensure a steady supply of the raw material at a stable cost. Besides, Indian tire makers are devising new strategies to drive their growth in the long term. Indian tyre manufacturer Ceat intends to strengthen its focus on higher margin products and non-truck segment like light commercial vehicle, passenger car and two-wheelers tires, rather than on truck and bus radial tyres which currently make up almost 60% of its sales, said Anant Goenka, Deputy Managing Director at Ceat. He added that the company intends to raise share of its aftermarket sales which currently stands at around 65%. Other companies such as Apollo and JK Tyre are working on raw material substitutes. Apollo Tyre is also reviewing existing contracts with suppliers to maintain a leaner inventory.

According to the data released by the state-run Rubber Board, India’s natural rubber production increased 3.7% to 861,950 tonnes during April 2010 to March 2011, while the consumption during the same period was 949,205 tonnes. The Rubber Board estimates the country's natural rubber production for the year 2011-12 at 902,000 tonnes and consumption at 977,000 tonnes. Around 95% of the Indian rubber plantations are based in the country’s Kerala region in the southernmost tip of the country where farmers are unable to further expand their plantations due to land shortages.

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Nooj wrote:A lot of new tyres have a high silicon content, so I guess combining that with recycled rubber will be the obvious short term answer.

At least I can help your tyres last a bit longer, advanced notice of a sale I have coming up:

Nooj wrote:

Dissipates heat increasing tyre life

• A) your tyres take a bit longer to warm up?
  B) your tyres heat more evenly meaning the sides stay warmer (or the less used side stays warmer)?

Aladinsaneuk wrote:Nice to see Andy still googles for rubber while on his lunch break....

HowardQ wrote:Just a silly thought, but I did not think tyres used any natural new rubber any more.
Not even sure if they use much recycled stuff, aren't they mainly synthetic with mixtures of stuff like silicon and carbon black etc.?

more of a benefit to lazy car drivers who never check their pressures and so run on under inflated/overheated tyres,

BikerGran wrote:The article quoted at the beginning is about Indian tyre manufacturers - now I've had a cheap and nasty Chinese tyre but I'm not aware of having had any Indian ones - are any of the major companies Indian?

randomsquid wrote:I'd guess they just tapped the tree into a mould and painted the result black.