More bad news for rubber manufacturers, tire makers

The rising cost of rubber is putting pressure on domestic tire producers, which have seen declining profits for most of the last 12 months.
Net profits of Wuxi Boton Belt Co, a rubber product maker, totaled 44.19 million yuan ($6.70 million) in 2010, a drop of 8.51 percent over the previous year, the company said Friday in a filing with the Shenzhen Stock Exchange.
Shrinking net profits are due to a sharp rise in rubber prices last year, the company said in the filing.
Benchmark May 2011 rubber futures contract traded on the Shanghai Futures Exchange hit a record high of 43,500 yuan ($6,598.21) Wednesday, compared to around 20,000 yuan ($3,033.66) in June last year.
Bigger rubber makers in the country have also predicted falling net profits over the past year, attributing it to surging rubber prices.
Shanghai-listed Aeolus Tire Co, a major tire producer based in Henan Province, estimated in January that its 2010 net profit would dive by around 50 percent to 310.05 million yuan ($47.03 million). Guizhou Tyre Co, another Shanghai-listed tire producer, also forecast in January that its net profit over the past year would fall 50 to 70 percent to 111-180 million yuan ($16.84-$27.30 million).
Industry watchers believe rubber prices will remain at the current high levels this year, given tight supply, which will continue to have an impact on domestic tire makers.
Rubber futures prices are likely to moderate in the middle of the year as supply will increase due to the beginning of the tapping season of rubber, while trending upwards again in the second half of the year, said Guo Tiezheng, an analyst at First Futures Brokerage Co based in Tianjin.
Guo Cheng, an analyst with Yong'an Futures Brokerage Co in Beijing, was more bullish on the rubber market.
"Rubber supply growth cannot meet the increase in demand for tires spurred on by strong car sales," he said.
Domestic rubber manufactures have urged the government to help the industry weather the storm, according to an article posted on the rubber association website in January.

(Source: http://english.peopledaily.com.cn/90001/90778/90860/7286564.html)