Stocks of paint and tyre companies saw significant declines as crude oil prices reversed their downward trend, rising over 4% due to escalating geopolitical tensions in the Middle East. Iran’s recent missile strike on Israel has heightened fears of a wider conflict, prompting concerns about potential supply disruptions that have contributed to the surge in oil prices.
The decorative paint industry is particularly vulnerable to fluctuations in crude oil prices, relying heavily on petroleum-based raw materials. Raw material costs make up 55-60% of production expenses, meaning that any increase in oil prices directly impacts the gross margins of paint manufacturers.
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Tyre production also relies significantly on crude oil, which serves as a key source for synthetic rubber and other petrochemicals. Rising crude prices increase the costs of these materials, squeezing profit margins for tyre companies, which typically benefit from lower oil prices.
As of 9:50 AM, shares of Asian Paints dropped 2.5% to Rs 3,196 on the NSE, while Berger Paints fell 1.7% and Kansai Nerolac declined over 1.2%. Tyre stocks faced similar declines, with CEAT, Apollo Tyres, Balkrishna Industries, and JK Tyres experiencing losses between 1-5%.
In addition to these developments, increasing crude oil prices also raise the costs of producing titanium dioxide, a vital ingredient in white paint. Over the past year, Asian Paints shares have gained around 1.2%, while Berger Paints has performed slightly better with an 8.5% increase. In contrast, Kansai Nerolac shares have fallen by 5%, while the Nifty 50 index has surged by 31%.
