Rubber Price Dip Boosts Margins for Tyre Makers
Staff Report
Karachi: Dip in International rubber prices unlock a major cost advantage for Pakistan’s tyre manufacturers.
With rubber comprising up to 30% of production costs, firms like GTR and PTL are on the roads to make gain if lower prices persist.
International rubber prices tumbled by 22% from their recent peak level of US$2.21/kg in September 2024 to average of US$1.66/kg in July 2025.
With raw material cost corrections and volumetric growth supported by higher auto sales— driven by low car financing rates—we believe the PSX auto parts sector, particularly the tyre segment, is well-positioned to outperform in the near term,” Sherman Research said in its report.Refineries’ Margins Decline
Rubber prices posted 7-year peak in 2024 The price of rubber went up in 2024 primarily due to heavy monsoon rain followed by extreme heat wave in Thailand and typhon in China.
Another reason for the increase was the anticipation of the EU Deforestation Regulation (EUDR) at the end of 2024. The law would restrict imports of rubber tied to deforestation, leading to supply concerns, early buying by EU traders, and higher compliance costs—all of which added a risk premium to rubber prices.
To note, there are two kinds of rubbers used in manufacturing. One is the natural rubber and the other is the synthetic rubber derived from crude oil.
Around 75% of the natural rubber is produced in South Asia, primarily in Thailand, Indonesia, Vietnam and Malaysia due to hot and wet tropical conditions. While, China is the largest importer of the commodity. Rubber prices declined by 17% in CY25, inducing volumetric sales After rallying in 2024, the rubber prices are on a declining trend.
There are multilayered factors behind the decline ranging from 1) postponement of EUDR by at least 1 year 2) Uncertainty around US tariff on China, Thailand and Malaysia which prompted consumers to hold off from buying rubber products 3) Lower oil prices as consumers are shifting towards synthetic rubber dragging the natural rubber prices down as well.
The prices are expected to remain low in 2025 provided there are no adverse weather condition specifically in South Asia which could disrupt supply chain.
In Pakistan, tyre manufacturing is estimated to consume around 15-20% of total rubber consumed, while rest is being used by other industries.
During FY25, Pakistan is estimated to consume around US$285mn worth of crude rubber as a raw material for various usage. GYTR and PTL seems major beneficiary amongst listed firms Interestingly, rubber prices declined by an average 17%QoQ during 4QFY25.
It is estimated that crude rubber constitute around 25-30% of the total cost of tyre. Although the recent decline in rubber prices may result in minor short-term inventory losses, sustained lower prices could boost margins by 2.5–3%, assuming only half the cost savings are passed on to consumers to remain competitive against imported tyres.
Tyre manufacturing industry (including GTYR and PTL) is currently trading at P/BV of 0.9x compared to average P/BV of 1.1x during last 5 years. 5 years back, the industry was trading at P/BV of 2.0x. PTL is the new entrant in the market which was listed on PSX in FY21 at P/BV of 2.4
