Apollo, JK Tyre pondering rubber plantation investments
Existing speculation on Apollo Tyres’ intention to branch into the natural rubber segment has been boosted by an article in India’s Business Standard newspaper. This suggests that both Apollo and JK Tyre may be in the business for plantations in Southeast Asia. The two tyre makers’ dependence, along with their competitors, upon ever more expensive spot market purchases has locked them into a situation where external factors determine the price they must charge for their products; the attractiveness of eliminating reliance upon the fickle natural rubber market is therefore very easy to understand.
“As far as buying rubber plantations, or for that matter any kind of backward integration is concerned, we are always open to possibilities depending upon the need of the hour,” Apollo Tyres managing director Neeraj Kanwar told the Business Standard. “Most importantly, a move like this needs to be a strategic fit with our business and long-term goals.”
For competitor JK Tyre, a firm decision seems to be even closer: “Yes, JK Tyre is seriously considering buying rubber plantations in South-East Asia,” stated Raghupati Singhania, vice-president and managing director of JK Tyre & Industries. “Availability of plantation in India is rather difficult, hence it makes sense to look at alternatives. South-East Asian countries are mostly manufacturers or traders and hence buying land is cheaper there.”
Commenting on the two companies’ potential branching out, the Business Standard notes that during the last two years the price of natural rubber has increased 198 per cent to Rs 210,550 (£2.93) per kilogram.