MUMBAI - Natural rubber prices in India jumped to a two-and-a-half-year high on Thursday on limited supplies and tracking gains in overseas markets due to supply disruptions in top producer Thailand, three dealers said.
This price rise would increase the raw material cost of tyre makers, thereby putting pressure on their profitability, as natural rubber makes up more than 40 percent of the cost of a tyre.
The spot price of the most-traded RSS-4 rubber (ribbed, smoked sheet) at the Kottayam market in the top producing southern state of Kerala rose by 200 rupees to 14,500 rupees ($213.24) per 100 kg, the highest since June 2014.
"Farmers are delaying selling expecting further rise in prices. The rally in overseas markets is also boosting sentiment," said George Valy, a dealer based at Kottayam in Kerala.
Benchmark TOCOM rubber futures rallied to their highest in nearly four years, extending gains into a third session, boosted by supply concerns after flooding hit a major rubber-producing area in Thailand.
Thailand will lose around 10 percent of its rubber output in the 2016-2017 crop year due to flooding, a senior industry official said.
Shares of Indian tyre companies, including Apollo Tyres Ltd , JK Tyre & Industries Ltd, CEAT Ltd and MRF Ltd, were trading lower in a firm Mumbai market.
($1 = 67.9999 Indian rupees)