Bridgestone and Goodyear raising prices due to rubber shortage

Article by Christian Andrei, on September 22, 2010

As tiremakers face their biggest shortage since 2007, prices have escalated. Bridgestone Corp., the largest tiremaker by sales, is raising prices in Europe for the second time this year while Goodyear Tire & Rubber Co. is charging even more.

Pongsak Kerdvongbundit, managing director of Phuket, Thailand-based Von Bundit Co., the largest natural-rubber producer and exporter in the world’s biggest supplier, said that tree-tapping across Asian plantations was hampered by the drought earlier this year as well as the heavy rains.

He added that for at least two more years, global production will fall behind soaring demand.

Goldman Sachs Group Inc. said that stockpiles of the raw material, which is also used in gloves and condoms, will fall by 12% to 67 days of demand next year, the lowest level in at least a decade.

The bank estimates that consumption will exceed supply by 127,000 metric tons, the most since 2007. Makoto Sugitani, a senior director at Newedge Japan Inc. who made a correct prediction about the rally in January, said that futures in Singapore may increase by 20% by March.

What this means is that rubber would cost a record high of $4.20 a kilogram. Rubber sales have been seen to increase the most in six years, boosted by what the International Monetary Fund regards as the quickest global economic growth since 2007.

Rubber farms were ruined by rain and flooding in top producers Thailand and Indonesia. Last July, Michelin & Cie., the world’s second-biggest tiremaker, said that commodity costs would reduce full-year earnings by up to 650 million euros ($850 million). [via autonews - sub. required]

Topics: tires, price

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