The fall in rubber prices on Monday to Rs 185 per kilogram from Rs

RELATED ARTICLES Bond prices rise on resumption of market operations by RBI

201 last week is expected to benefit domestic tyre manufacturers like Apollo, Ceat and JK Tyres among others.

Analysts expect that the fall of over Rs 16 per kilogram in a day will help companies improve their operating profit margins in the first and second quarter of next financial year.

Industry officials said the fall in prices is on account of overbuying of rubber on the Tokyo, Singapore and domestic commodity exchanges because of the fear of short supply. With the earthquake and tsunami, many companies in Japan have cut the production of passenger cars as well as tyres. This will

indirectly benefit Indian tyre industry, according to industry officials.

Paras K Chowdhary, managing director, Ceat, told Financial Chronicle that the decline in prices has brought some relief to his company. "We used to buy 200-250 tonnes of rubber per day. But with the fall in rubber prices, we have bought more than the limit,” said Chowdhary. In February, rubber prices had peaked to Rs 240 per kg. According to an estimate, domestic tyre manufacturers consume around 250-500 tonne rubber per day.

Alok Agarwal, head of institutional equities, Mata Securities India, said, “The fall in rubber prices will benefit all domestic tyre manufacturers. It will improve their EBITDA (earnigs before interest, tax, depreciation and amortisation) margins for the first quarter and second quarter of the next financial year. ”

“Usually tyre companies get into two to three months forward contract for rubber so that their inventory is taken care for the quarter. So, entering into contract now will help companies save almost 10 per cent of their raw material cost for next couple of quarters,” said an analyst with domestic brokerage, on the condition of anonymity.

Some of Japan’s largest manufacturers — including Honda Motors, Nissan and Toyota — shut down facilities in northern Japan after the March 11 earthquake caused power supply disruption.

Meanwhile, Bridgestone, the largest tyre maker, has stopped production at four facilities in the Kanto region, the company said on its website. Another factory in Yokohama has partially restarted production, it said. Japan, the fourth-largest rubber consumer, accounts for about seven per cent of global demand