Watts “To Review Prices Quarterly” As Rubber Prices Rise
“The rising price of natural rubber will present one of the major challenges that all industrial tyre manufacturers face in 2008” stated Jean-Paul Mindermann, Chief Executive Officer of Watts Tyre Group, at his Q3 Business Review Conference. The facts are startling; after 2006’s wild fluctuations the price of RSS3 has risen sharply and steadily in 2007. In January this year the price per kilo was 197 US cents, ten months later it sits at 255, with market analysts predicting that the price will soon hit 300 cents per kg. Over the last 12 months the price has risen by more than 60 per cent.
This massive rise in price of the key raw material has largely been driven by soaring demand from China and India as their industrial and automotive sectors continue to develop, and the shortfall in supply from the main rubber-producing nations in South East 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.
Mr Mindermann continued: “Over the past two years we have absorbed a large part of these increases and where possible will continue to do so. However in response to this latest development we intend to review retail and dealer prices quarterly in 2008 to ensure that our pricing is reflective of true cost. We hope that the price of natural rubber will stabilise in the coming months but we must be mindful of the factors that have caused this increase and recognise that largely they are not going to go away.”
“The task for tyre companies such as ours is to demonstrate the true value in our total offering. The rationale for choosing a market leading supplier such as Watts lies not just in the quality of the products but also in the knowledge that lies behind them and the capability to deliver the right solution for customers.”
He concluded: “There is a false economy in buying products of a lesser quality, they may well be cheaper to buy but do not last as long or perform as well, all of which adds to the cost. The key measures are total cost of ownership and downtime, customers will demand value in the light of price reviews and we must deliver it.”