Synthetic Rubber Prices Likely to Remain Volatile in Quarter Four of 2022

In quarter four of 2022, synthetic rubber prices are anticipated to remain volatile. The recent wave of price hike for several raw materials have reached a peak. Natural rubber was trading 7.6 percent on September 01, 2022. The trade of Styrene butadiene rubber were recorded at 5.8 percent. Meanwhile, SNCP's September pricing for oil-extended EPDM increased 17.2 percent.

Compared to July 01, 2022, when costs were only marginally higher, this represented a huge increase. Additionally, there was a noticeable increase in the price of chloroprene rubber, which was 20.5% higher in September than it was in July (4.2% higher).

In contrast, nitrile rubber was trading at a price that was 21.4% higher than it was on January 01, 2022; this is a minor decrease from the 27.9% increase that was observed in July 2022. However, there was no slowing down in the price increase for carbon black (>= N300), which was 46.6% higher in September 2022 than it was at the beginning of January 2022 and 38.4% higher in July 2022.

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The tyre business is currently experiencing moderation in both natural rubber and crude prices, which bodes well for a margin recovery after witnessing hyperinflation in major input costs over the last 15 to 18 months. The average raw material basket now costs USD 2.19 per kg (INR 180 per kg), and there was a continuous increase of over 50% in key input prices since the first half of FY21, and a decline in gross margin of more than 10%.

The spot prices for natural rubber are 12.5 percent lower than they were during the first quarter of the current fiscal year. As a result of the delayed effects of the inflation in crude oil prices in the first half of the current calendar year, the prices of synthetic rubber and carbon black are now 6-7 percent higher than their average price from the first quarter.

The price of underlying crude oil has fallen by 22 percent. As per market experts, it demonstrated a lag in the cost of carbon black and synthetic rubber.

The EBITDA margin or operational profit margin will fluctuate by 160 basis points for every 10% change in the price of natural rubber, synthetic rubber, or carbon black, according to projections from a brokerage business based in Mumbai.

Additionally, it suggests a margin expansion beginning in the third quarter of the current fiscal year, with the full benefit appearing in the next fiscal year. The market experts anticipated that blended gross margin would increase by 190 basis points in FY24 compared to the prior fiscal year. Original equipment manufacturers' (OEMs) demand for tyres has increased across all categories.

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According to Procurement Resource, prices for synthetic rubber are expected to remain unstable in the fourth quarter of 2022. The latest wave of price increases for several raw commodities has peaked. On September 01, 2022, natural rubber was trading at 7.6 percent. The trade of styrene butadiene rubber was reported as 5.8%. In the meantime, SNCP's September oil-extended EPDM pricing climbed 17.2 percent.