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Tuesday, March 9, 2010

Tyre cos hold prices despite rubber rally,hits margin

India's top tyre firms are reluctantly holding prices, risking a hit on profit margins, despite a recent surge in input costs as they wait for prices of natural rubber to stabilise from a current record high.

The price of the most traded RSS-4 (ribbed smoked sheet) rubber hit a record high of 14,425 rupees per 100 kg on Saturday on demand from tyremakers as well as a poor crop this season.

"We need to increase prices but the market situation is not conducive to price increase. We need to see the market this month and then take a view," said A.S. Mehta, director-marketing at JK Tyre & Industries Ltd.

"When input costs are higher and the market does not permit the selling price increase there will certainly be an impact on margins," he added.

Indian tyre makers have witnessed a surge in volumes following a boom in the auto industry and have already raised prices by 3-5 percent in January, while in February they passed on a 2 percent excise duty increase in the federal budget.

Apollo Tyres' Chief Financial Officer Sunam Sarkar said the company was considering raising tyre prices in the near term, but has not yet decided the quantum, while Ceat Ltd may review prices in April, said Arnab Banerjee, Executive Director, Sales Marketing and Outsourcing

Natural rubber production in the country dropped 4.3 percent in the first eleven months of 2009/10, pushing prices to a record high and forcing tyre makers to double imports.

"Erratic monsoon has badly affected rubber plantation this year. Tapping and production is unlikely to rise in next 3-4 months. It would remain at last year's level," said a senior official at Rubber Board.

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