Rubber prices should remain stable at current level: JKTyre

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Rubber prices should remain stable at current level: JKTyre

Global Michelin’s decision to raise tyre prices has brought interest back in the tyre sector. AK Kinra, CFO at JK Tyre says that rubber prices have been stable in the last few weeks time. He does not think that there is going to be a huge upsurge in the next few weeks.

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Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » RELATED NEWS Tyre prices all set to rise Hike in tyre prices necessary: JK Tyre ALSO READ See latest News about JK Industries See previous management interviews See what other Experts & Brokerages are saying about JK Industries JK Tyre & Ind BSE | NSE 25/05/12 Are Mutual Funds betting on JK Tyre & Ind?

Global Michelin's decision to raise tyre prices has brought interest back in the tyre sector.

AK Kinra, CFO at JK Tyre says that rubber prices have been stable in the last few weeks time. He does not think that there is going to be a huge upsurge in the next few weeks. He feels that they should remain stable at the current levels.

Despite the production in Malaysia being higher, he still feels that one has to see the global position of demand and supply.

Excerpts from CNBC-TV18's exclusive interview with AK Kinra:

Q: We have seen the rubber price dropping pretty much across Asia, it currently prevails at Rs 90 a kilo, can we expect a further softening? What is your outlook on rubber prices in the domestic market?

A: So far, rubber prices have been stable in the last few weeks time. I do not think that there is going to be a very huge upsurge in the next few weeks. They should remain stable at the current levels.

Q: Do you think that across the board in Sri Lanka, also in Tokyo where we have a lot of rubber trade, the prices have been softening. Would that add to your margins?

A: No, I do not think it's low margins. I am aware of the Sri Lanka factor, but I think that the rubber prices have been artificially very high in the last couple of months. They have been kept very artificially high.

They are seeing their real levels now. The price of rubber has gone to as high as about Rs 110 a kilo and the current levels are about Rs 90 a kilo. I am seeing a real level. I think it should settle at that level.

Q: Last week Michelin raised prices by about 6-8%. Would you see any price increase by domestic manufacturers in light of that, and secondly, in countries like Malaysia where people were expecting production to go up by 9-10%, what sort of production growth do you see for domestic manufacturers in India like yourself?

A: Despite the production in Malaysia being higher, I still feel that one has to see the global position of demand and supply. Prices have seen somewhat at real levels.

So the tyre industry and certain other industries that are rubber users had also been thinking of alternate materials. Currently, the demand is also seeing a bit of change. This should keep pressure on prices to at the lower levels.

Q: The question which arises is for tyre manufacturers like yourself, would you be able to negotiate higher prices on the back of what's happening with Michelin or would your manufacturers actually pressurise you to lower prices of tyres, given the softening in rubber prices?

A: As far as tyre prices are concerned, they are not only dependent on natural rubber. After all, their major input is petroleum products. I am not just talking about the price of petroleum for a day only.

Petroleum prices have also now crunched to about USD 74 per barrel though, which is again at a very high rate. The tyre prices are moving because of the pressure on petroleum products.

Q: Do you see yourself being able to revise the tyre prices upwards?

A: Suddenly tyre prices will be revised upwards. The cost is really going up because of the petroleum products. One must have seen in the papers that Sumitomo has also announced an increase of 5% price effective from October 1.