From Clacton, U.K./Tyres & Accessories via TireReview.com

If the current raw material price trend continues, it could help improve margins at tire manufacturers.

Natural rubber, which accounts for about a quarter of tire raw material costs, is down more than 20 percent from the all-time high it hit earlier this year.

Continental executive board member Hans-Joachim Nikolin suggested that while natural rubber price relief was welcome it was unlikely to cancel out the increased prices of steel and other oil-linked raw material prices like synthetic rubber and carbon black.

Deutsche Bank analysts highlighted the fact that natural rubber recently fell below $2/kg – January 2005 levels. This is an almost 30 percent drop from peak reached 2.5 months ago. “Since spot price has a four to six months lag effect in tire companies profit and loss, natural rubber purchasing bills could be for the first time in 2007 lower than in 2006," the analysts observed.

According to Deustche Bank, Michelin is the company most sensitive to natural rubber price variation. In 2006 its natural rubber-purchasing bill (approx. $1.8 billion) is expected to be equivalent to its EBIT (approx. $1.7 billion).