Shares of paint and tyre players, along with other firms that use crude derivatives in their manufacturing processes, gained in trade on Tuesday, June 24, after crude prices cooled off, following a ceasefire in the Middle East.
The announcement was made by U.S. President Donald Trump via his Truth Social account, offering much-needed relief after 12 days of turmoil.
In the previous session, Brent crude futures closed lower by $5.53 or 7.2 percent at $71.48 a barrel, while U.S. West Texas Intermediate crude (WTI) eased $5.53 or 7.2 percent to $68.51.
At 9.20 am, Asian Paints shares were up 1.6 percent at Rs 2,300 on the NSE, while Kansai Nerolac jumped 1.8 percent to Rs 243 per share, and Berger Paints and Akzo Nobel shares reported gains.
Tyre stocks also faced a similar fate. Shares of CEAT, Apollo Tyres, MRF and JK Tyres were all in the green, rising up to two percent.
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Crude oil prices have a significant impact on the decorative paint industry due to its heavy reliance on raw materials. Paint production involves over 300 components, many of which are derived from petroleum. Raw materials typically make up around 55 to 60 percent of total input costs, meaning any fluctuation in crude prices can directly influence profit margins.
Brent crude also plays a key role in the production of synthetic rubber and various petrochemical inputs essential for tyre manufacturing. When oil prices climb, so do the costs of these materials, pushing up overall production expenses for tyre makers. On the flip side, a drop in crude prices helps reduce input costs, leading to better margins.
Additionally, crude price hikes affect the cost of producing titanium dioxide, a vital element in white paint. Higher oil prices can tighten margins for paint manufacturers by inflating input costs and limiting pricing flexibility.
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