IMPACT OF NATURAL RUBBER PRICE VOLATILITY ON TYRE INDUSTRY: A STUDY BASED ON BICYCLE TYRE INDUSTRY IN SRI LANKA
Abstract
From the beginning of industrial revolution, natural rubber has made a significant impact on the world economy, and as a result rubber plantation industry has played a vital role. High volatility in natural rubber price may be a result of international trade policies, natural disasters and political changes. Major component of tyre continent natural rubber, but it could be substituted with general purpose synthetic rubber or could be blended with ideal ratio. On this study the objective is to ascertain the level of impact of the volatility of natural rubber price on bicycle tyre cost of production and to find ways of minimizing the impact of natural rubber cost.The secondary data of past ten years of natural rubber prices was obtained from CRTA and synthetic rubber price and relevant manufacturing details from the reputed manufacturers. Since secondary data are highly volatile, the forecasting technique was selected as “Auto Regressive Integrated Moving Average” and fixed the ideal model. The forecasted prices of natural rubber and synthetic rubber for the period of 3 months were to be analyzed. If the natural rubber price is greater than synthetic rubber, it was blended ideal ratio of natural rubber and synthetic rubber base on other constrain else find a solution through Holistic Approach. It was found that natural rubber (RSS111) price is greater than synthetic rubber (SBR 1502) by Rs 103.70 /kg in three months period. The ideal blending ratio of natural rubber and synthetic rubber was 60:40. The cost of production on bicycle tyre could be minimized by 6%. It is recommend to replace synthetic rubber as much as possible in this particular period. Subsequently, impact of high price volatility of natural rubber could be mitigated.
Key Words: Price Volatility, Rubber Industry, Natural Rubber, Bicycle Tyre
