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Indian tyre makers may up prices again in 1-2 months

MUMBAI (Reuters) - Indian tyre makers are likely to raise prices again in about two months to combat increasing input costs due to a spike in rubber prices, industry officials said.

Children play with bicycle tyres in a village on the outskirts of Chandigarh, August 7, 2007. Indian tyre makers are likely to raise prices again in about two months to combat increasing input costs due to a spike in rubber prices, industry officials said. REUTERS/Ajay Verma/Files

Earlier this month, major tyremakers such as Ceat and JK Tyre had raised product prices by 5 percent, while MRF increased it by 2 percent.

Rubber prices, which make up 60 percent of the cost of tyres, have risen more than 22 percent in 2008, according to Rubber Board data. Natural rubber rose on a tight supply, while high crude oil prices pushed up synthetic rubber.

“We are hoping that in one to two months prices will have a sobering impact but if that does not happen, we will have to go up again, there is no choice”, Ceat’s managing director, Paras Chowdhary, said.

Ceat said earlier this month that higher raw material prices will hurt its margins by at least a 100 basis points in 2008/09.

“The way cost is going up is absolutely unbelievable. The government is controlling petrol and diesel prices...but has absolutely no control on raw material cost”, Chowdhary said.

Raising prices in another couple of months is on the horizon for JK Tyre & Industries too, an official said.

“We are examining the situation. If it is necessary we will go for it,” said A.S. Mehta, director, marketing, JK Tyre & Industries Ltd.

MRF’s executive vice president, Koshy Varghese, said it was an option, but declined to give a time frame for the increase.

MRF, which last week reported a 83 percent rise in Jan-March profit, said despite its April price increase the rising input costs would reflect in its June quarter results.

TIGHT CONDITIONS

However, analysts did not see prices coming down soon.

“We are witnessing a very bullish trend. Supply situation will remain tight for another few months and prices are likely to touch 125 rupees (per kg),” said Alex Mathews, senior analyst with Geojit Financial Services Ltd.

Prices of natural rubber were ruling at 117 rupees per kg in the spot market in Kottayam, Kerala.

India produced 825,000 tonnes in 2007/08, below an earlier forecast of 874,000 tonnes, dented by a July-Sept shortfall on heavy rains and a viral fever which affected tappers.

However, tyre dealers said the companies tended to be opportunistic about price increases and did not cut prices when rubber prices came down.

“They are just looking at their profits...when cost goes down they don’t reduce prices,” said S.P. Singh, convenor of the All India Tyre Dealers’ Federation.

“They usually hike prices quietly two-three times in a year. They don’t revert it back normally, unless auto companies start making noise about it,” said Angel Broking analyst Girish Solanki.

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