Date: 08 March 2017

It is no secret to anyone in the rubber industry that the global raw material market has been quite unstable in the past half a year, and especially in the last 3 months we have seen a dramatic increase in pricing of raw materials, involved in rubber compounding. In this short time frame the prices have hiked as much as 70% compared to November 2016, as reported by ICIS – the world’s largest petrochemical market information provider.

This unfortunate course of events has of course led to price raises by all rubber manufacturers and consequently end product producers. In the situation that we are all facing in the present day, we feel it is important to remind our whole network couple of things to make sure we all stay on track and strive for the best together.

1. Regional producers of polybutadiene rubber (PBR) continue to hike prices in line with soaring costs of feedstock butadiene (BD). BD goes into PBR, which is a raw material for the production of tyres for the automotive industry. On 9 February, high-cis PBR prices were assessed at an average of $3,400/tonne CFR (cost and freight) SE Asia, according to ICIS data. Offers for March are being quoted at already $3,700-3,800/tonne CFR. However, it is forecasted that spot prices of PBR in Asia may halt their uptrend soon since downstream tyre makers have retreated to the side lines pressured by high offers.

2. Regardless of the challenges of costing, our compounds stay the same with same properties as we promise to deliver every time! GIIB stands on the strong basement of values, which are integrity, trust and respect. Therefore, jeopardizing our compound performance in an attempt of lower cost and higher profits would be a direct violation of our very own core principles.

3. Meanwhile, everyone needs to be extremely vigilant for unprofessional players in the market, who are trying to keep their pricing down by not complying with safety regulations. A notable example has happened recently in Malaysia, where it has been brought up by the Minister of Transport at a press conference that around 100 retread tyre manufacturers in the country fail to meet country safety standards. As a result, the cost of compliant retreads reaches 250USD whereas the ‘fake’ ones may cost only about 90USD.

4. Naturally, we are all concerned about losing customers and business share. That is why you can still see some players in the rubber marketplace keeping their prices at the same level as before the material cost increase. However, it is important to understand that with this kind of strategy all parties are at risk: manufacturer, retreader and end user.

5. Ultimately, in the present market environment, if the prices are not aligned to sustain the increased costing, this would mean killing your own business. Simply speaking, you can only sustain up to a certain point with margin and profit losses, even for the sake of retaining customers. As a conclusion, it’s safe to say that if one doesn’t review and increase their pricing, one is bound to lose sooner or later. Therefore, it is important to react to costing changes faster and increase product pricing accordingly.

To conclude, GIIB would also like to remind that we always welcome the dialogue on this burning matter and we will keep being transparent about our pricing policies. At the same time we will keep being true to our values and delivering the same quality of our products as you’ve been promised and expect us to deliver, without exceptions.