Watts plans to review pricing in the wake of skyrocketing natural rubber costs
According to Jean-Paul Mindermann, CEO of Watts Tyre Group, natural rubber prices will not come down anytime soon.
At his Watts third-quarter Business Review Conference, Mindermann outlined the problem.
"The rising price of natural rubber will present one of the major challenges that all industrial tire manufacturers face in 2008. The facts are startling. After 2006's wild fluctuations, the price of RSS3 (natural rubber) has risen sharply and steadily in 2007.
In January this year, the price per kilo was $1.97, he said. Ten months later, it has risen 29% to $2.55 per kilo, "with market analysts predicting that the price will soon hit ($3) per kilo. Over the last 12 months the price has risen by more than 60%.
Mindermann says the price increases have largely been driven by two factors:
1. soaring demand from China and India as their industrial and automotive sectors continue to develop, and
2. the shortfall in supply from the main rubber producing nations in southeast Asia.
"Combined with high oil prices and an increased cost of freight, the overall effect is that the cost of manufacture and distribution of industrial tyres will continue to increase."
In response to this development, Watts will review retail and dealer prices quarterly in 2008.
"The task for tire companies such as ours is to demonstrate the true value in our total offering," says Mindermann.