Rubber Prices Hit 2013 Highs: What It Means for Tyre Makers' Margins and Stocks
Key Takeaways
- •Natural rubber prices have risen to their highest level since 2013, raising input costs for Indian tyre manufacturers.
- •Crisil Ratings expects tyre makers' operating margins to fall to about 11.5-12% in FY27 from 14.2% in FY26.
- •Rubber supply is under threat from weather-related disruptions in key Southeast Asian producing countries.
- •Price increases are passed on to customers in a staggered manner, spreading the margin impact across FY27.
- •The companies affected include MRF, CEAT, Balkrishna Industries, Apollo Tyres, and JK Tyre, while the sector continues its capacity expansion investments.
Natural rubber prices have climbed to their highest levels since 2013, putting pressure on Indian tyre manufacturers. According to Crisil Ratings, tyre makers' operating margins are likely to moderate to around 11.5-12% in FY27, down from 14.2% in FY26, as raw-material inflation outpaces staggered price increases.
Rubber is the single largest raw-material cost for tyre makers, so sustained price increases flow directly into input costs. Rubber supply currently faces multiple risks, including weather-related disruptions in key producing countries in Southeast Asia, and the industry must contend with whether higher input costs can be passed on to customers through price hikes. Pass-through is typically staggered rather than immediate, which is why Crisil expects the margin compression to play out over FY27 rather than being absorbed at once.
Despite the margin squeeze, the sector's investment cycle continues, reflecting ongoing capacity expansion commitments even as profitability faces headwinds.
The companies affected include MRF, CEAT, Balkrishna Industries, Apollo Tyres, and JK Tyre.
Source: CNBC-TV18
