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Shares of tyre companies such as MRF, Ceat, Apollo Tyre, JK Tyre, TVS Srichakra, Goodyear and Balkrishna Industries jumped between 2 and 7 per cent on Wednesday, as the raw material price fell sharply in the last three days. “The outlook for tyre companies looks positive for short- to medium-term in the wake of softening of natural rubber prices globally,” said analysts.
Akshay Agarwal of Kochi-based Acumen Financial Services said stocks of tyre companies have moved up in the recent period between 5 and 10 per cent. Global rubber prices have cooled significantly due to the slowdown in demand from China. “Indian tyre companies had increased prices when rubber was moving up, and the current softening will aid profits,” he said.
Thanks to the anti-dumping duty imposed by the US on some Chinese tyres, he said Indian manufacturersare seing a sharp rise in export volumes. “The pickup in domestic demand with the opening up of the economy only aids the outlook further,” he added.
Evergrande impact
Sources in the rubber market pointed out that the price drop for natural rubber was around 5-10 per cent in the last one month both in domestic and overseas markets.
However, Jom Jacob, Senior Economist, Association of Natural Rubber Producing Countries (ANRPC), Kuala Lumpur, told BusinessLine that the bearish trends prevailing in rubber futures over the last three days are largely a manifestation of a selling pressure in global equities and commodities on contagion effect of China’s Evergrande debt crisis.
He said that the Evergrande crisis, a strengthening dollar and the bets on the outcome of the Federal Reserve’s meeting are keeping speculative traders away from riskier assets including commodities. The most recent drop in natural rubber prices is not attributed to any development in the physical supply-demand in the global market. NR prices are only reflecting the general downtrend in global equities and Asian commodities.
N Radhakrishnan, Advisor, Cochin Rubber Merchants Association, said that China might have temporarily stopped its procurement plans because of the ongoing crisis leading to a drop in rubber prices. They have to come back to meet the production requirements of its auto-tyre manufacturing sector, which would benefit the prices. An ANRPC report say that China is anticipated to import 4.920 million tonnes (mt) in 2021 and it has imported 3.250 mt between January and August. The balance 1.670 mt is expected to be imported in the remaining months of the year.