Inflated natural rubber pinches

Stretched supply and spiralling prices of natural rubber have pushed tyre makers to a tricky turf. The industry has seen costs soar, mounting pressure on profitability, as prices of the commodity surged over 33% on year in just the first five months of fiscal 2025.

The scale of impact on tyre makers can be gauged from the fact that natural rubber accounts for as much as 20-40% of the weight of tyres, depending on the category. Indeed, the tyre industry accounts for around 80% of natural rubber consumption in the country.

Natural rubber prices had hit all-time highs in 2011, breaching the ₹200/kg mark, after recovering from the global financial crisis, aided by accommodative stance of the Fed and other central banks, and logged a compound annual growth rate (CAGR) of 101% between 2008 and 2011. But, three years of surge in natural rubber prices from the slump of 2008 soon turned into a decade of subdued prices where the average price remained below ₹150/kg.

Since the end of 2023, however, skyrocketing prices — prices have again breached the Rs 200/kg mark amid a raft of challenges — and tight supplies of natural rubber have cast a long shadow on the industry even as steady expansion of the automobile industry and other major consuming industries keeps demand healthy.