Natural Rubber Heading for US$3.4/kg

The cost of natural rubber price is reportedly heading for a new high of US$3.4/kg, having more than doubled during the last year (1.5/kg to USD 3.4/kg,RSS3 grade). The news that already high prices are still on the up, highlighted in a Deutsche Bank reported published today, is expected to cause two further prices increases from tyremakers this year. It is expected to take “four to six” months for the record high prices to have an effect on the tyre companies’ profit and loss accounts.

To put the high prices into context, analysts at Deutsche Bank used three premium manufacturers’ natural rubber purchasing bills as examples. According to them, last year Continental spent approximately 500 million euros (7 per cent of tyre sales); Pirelli 340 million euros (8 per cent tyre sales) and Michelin 950 million euros (6 per cent of sales) on natural rubber.

Therefore, say the analysts, a two-times natural rubber price surge means the tyre industry will have to increase selling price by 7-8 per cent to fully offset this “headwind,” taking a constant dollar rate into account. Deutsche Banks view is that, as only 35 to 50 per cent price increases stick, the industry will have to pass on at least another 5 per cent price increase later to fully offset the latest increase.

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