The cost of natural rubber is reportedly heading for a new high of $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 tiremakers this year. It is expected to take “four to six” months for the record high prices to have an effect on the tire 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% of tire sales); Pirelli 340 million euros (8% of tire sales) and Michelin 950 million euros (6% of sales) on natural rubber.
Therefore, say the analysts, a two-times natural rubber price surge means the tire industry will have to increase selling price by 7%-8% to fully offset this “headwind,” taking a constant dollar rate into account.
Deutsche Bank’s view is that as only 35% to 50% price increases stick, the industry will have to pass on at least another 5% price increase later to fully offset the latest increase. (Tyres & Accessories)
(tirereview.com)
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