An interesting article in today’s Mint on how high natural rubber prices are forcing Indian tyre manufacturers to turn to synthetic rubber.
Natural rubber prices have risen by 13% since May as Indian production has been affected by rains and an outbreak of Chickungunya virus which affected the health of workers at rubber plantation in Kerala.
Natural rubber output is now projected to reach 743,000 tonnes for the year ending March 2008, down from last year’s 853,000 tonnes. Government officials have played down the impact of lost production citing sufficient stocks and healthy imports.
However, it appears from today’s report that the tyre industry has taken measures to alleviate the margin squeeze. Natural rubber is said to account for about 50% of costs for a tyre producer. And prices of synthetic rubber are on an average Rs6/kg lower than natural rubber.
The report states that the average ratio of synthetic to natural rubber was 79:21 last year. This has now changed to 74:26.