The God’s own country faced torrential rains which resulted into a natural disaster that claimed more than 264 lives and losses of ₹20000 crores. It was observed that, apart from Kerala, one in five BSE500 stocks was hit due to the floods. Major hit was for the commodities of Tea, Coffee, Cardamom and Rubber which showcased losses of about ₹600cr.
India being the sixth biggest producer and second largest consumer of Rubber, its output is likely to fall 13.5% to 60000 tonnes in 2018-19.The state of Kerala which has a monopoly over rubber production, produces around 92% of the total rubber in India. The reduced supply of the rubber, the main component of the tyre industries, due to the destruction of the rubber plantations in Kerala, has led to falling of shares prices of the major players like Apollo Tyre, JK Tyre, MRF, and Goodyear to 10% in the past few weeks. The reduced supply would inflate the domestic rubber prices and would hit the margins of tyre companies. Apollo Tyres, which produces commercial vehicle tyres and off-highway tyres at two plants located in Perambra and Kalamaserry, both the plant’s operations were disrupted due to floods .Loss of 1500MT (Approximately) was estimated by the company. Not just the Apollo tyre, MRF tyres shares prices having reducing after the flood. There has been a continuous fall in the prices from ₹78485 from 6/08/2018 to ₹74573 on 24/08/2018.A comparative analysis of the prices before and after the calamity shows how the industry has been affected.
Rubber accounts for 40% of the cost of production of an automobile tyre. As a logical collorary, Automobile industry would also be impacted by these floods. Auto companies will pass on some of the cost and absorb the rest, given its possible impact on vehicle demand. Rising crude-oil prices compounds the problem, especially for synthetic rubber prices. Analysts believe that, it would only be a short-term crisis, since the big firms would have inventory for 3-4 months and with the increasing Rubber imports from Indonesia, Malaysia, and south-east Asian nations, the industry is expecting to tackle the situation. All these would certainly have an impact on the margins of the tyre industries in the quarter ending on September.
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