Shares of tyre stocks rose in trade on September 4 as investors bet on hopes of margin improvement on the back of a decline in Brent crude prices, a key raw material in tyre manufacturing.
Brent crude is a major source of synthetic rubber and other petrochemical products used in tyre manufacturing. As crude prices drop, the cost of these raw materials decreases, reducing production costs for tyre companies. With lower raw material costs, tyre manufacturers can enjoy improved profit margins.
On that account, shares of MRF, Apollo Tyres, Balkrishna Industries and JK Tyres rose 1-4.5 percent in trade.
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Brent crude prices have dropped to their lowest in nearly nine months, nearing $73 per barrel, down from over $81 per barrel last week. The fall is driven by concerns about reduced demand in China, the world’s largest crude importer, due to the rising adoption of electric vehicles.
Goldman Sachs also aired similar concerns, predicting that Brent crude prices might slip to $68 per barrel by late 2025, if China oil demand remains flat through end of next year.
Additionally, the potential resolution of the Libyan crude production and export dispute raises concerns about excess supply. Ongoing expectations of increased OPEC+ production starting in October—aimed at compensating for the loss of Libyan output—further add to the downward pressure.
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