The rising cost of rubber is putting pressure on Chinese tire producers, which have seen declining profits for most of the last 12 months.
Net profits of Wuxi Boton Belt Co., a rubber product manufacturer, totaled $6.70 million in 2010, a drop of 8.5% over the previous year, the company said Friday in a filing with the Shenzhen Stock Exchange.
Shrinking net profits are due to a sharp rise in rubber prices last year, the company said in the filing.
Benchmark May 2011 rubber futures contract traded on the Shanghai Futures Exchange hit a record high of $6,598 Wednesday, compared to around $3,033 in June last year, according to a report by the Global Times.
Larger Chinese rubber makers also have predicted falling net profits over the past year, attributing it to surging rubber prices.
Aeolus Tire Co., based in Henan Province, estimated in January that its 2010 net profit would fall by around 50% to $47.03 million. Guizhou Tyre Co., in Shanghai, forecast in January that its net profit over the past year would fall 50% to 70% to $16.84-$27.30 million.
Industry watchers believe rubber prices will remain at the current high levels this year given tight supply, which will continue to have an impact on domestic tire makers.
Rubber futures prices are likely to moderate in the middle of the year as supply will increase due to the beginning of the tapping season of rubber, while trending upwards again in the second half of the year, according to analysts.