Metallurgy / Chemicals / Rubber & Plastics

Recently, the tire industry, which has been sluggish for a long time, has seen a rebound in the market driven by demand. In May, the prices of raw materials for all steel tires fluctuated and decreased, especially for auxiliary materials such as carbon black. The "production and sales boom" has become a common situation in the tire industry since the beginning of this year, and the industry's operating rate is also at a high level, with the prosperity gradually improving.

In recent days, listed companies such as Sailun Tire, Sen Qilin, General Motors, Triangle Group, etc. have said on the investment interaction platform that the domestic market has sufficient orders, some enterprises' orders in hand far exceed the existing capacity, and some enterprises' overseas semi steel tire orders have recovered to the level of the first half of last year, with obvious signs of market recovery. Multiple institutions believe that the decline in raw material prices combined with an increase in operating rates has led to expectations of repair in tire companies' profit margins, and the company's profit space is expected to gradually open up.

Cost reduction and profit margin to be repaired

Import and export data shows that rubber accounts for nearly half of the raw materials required for tire production, followed by materials such as carbon black, steel cord, and additives. Recently, due to the decrease in prices of major raw materials for tires, their costs have also been able to fall, bringing high expectations for industry profit recovery.

Guo Juan, an analyst in the tire industry at Zhuochuang Information, stated that the prices of major raw materials for tires have recently shown varying degrees of decline, effectively alleviating the pressure on tire production costs. Among them, in terms of raw materials, the average price of natural rubber in April was 11524 yuan (ton price, the same below), a year-on-year decrease of 10.72%; The average price of Styrene-butadiene was 11605 yuan, down 6.06% year on year; The average price of threaded steel is 4085 yuan, a year-on-year decrease of 20.25%; The average price of carbon black is 9227 yuan, a year-on-year decrease of 7.03%. In May, the average spot price of carbon black in the Chinese market was 7281 yuan, a decrease of 17.06% month on month and 30% year-on-year; The total production cost of a single all steel tire (12R22.5 parallel pattern, with a weight of 65 kilograms selected) has decreased to around 817 yuan per tire, a 4% decrease compared to the same period last year and a nearly 12% decrease compared to the same period last year.

At the same time, there are also advantages in terms of shipping costs. With the continuous easing of port congestion in various countries around the world, port capacity is gradually increasing, and sea freight prices are expected to stabilize within a reasonable range, which is beneficial for tire exports.

The industry believes that with the decrease in raw material and transportation costs, the profit space of tire companies is expected to gradually repair.

Demand rebounds, industry prosperity is gradually increasing

While raw material prices have decreased and cost pressures have eased, the April production and sales reports disclosed by various listed tire companies in recent times show that the production and sales situation of the tire industry has also continued to show a high growth trend.

Linglong Tire said that in April this year, the company sold 5.8153 million tires, up 31.63% year on year; The company sold 22.5457 million tires in the first four months, a year-on-year increase of 11.99%. The production and sales of Triangle Group also performed well. Since April, the company's production capacity has been close to full production. At present, the market sales are stable and the foreign trade orders are sufficient.

Import and export data shows that since the beginning of this year, with the recovery of exports and the recovery of domestic demand, tire companies have shown good sales performance, and the operating rates of various factories have remained at a high level, with significant repair in tire export volume.

In 2023, the unfavorable factors restricting the development of the tire industry gradually improved, the impact of the epidemic was eliminated, the overall economic situation improved, and the transportation industry gradually recovered. The operating rate of tire enterprises continued to be high.

According to import and export data from Jinlianchuang, in April, the overall operating rate of tire enterprises was around 65.67%, with a full steel tire operating rate of 69%, a half steel tire operating rate of 79%, and a diagonal tire operating rate of 49%. Tire exports also maintained a high growth rate. According to import and export data from the General Administration of Customs, from January to April this year, China's cumulative export volume of rubber tires was 2.71 million tons, an increase of 11.8% year-on-year; According to import and export data, the export amount was 47.461 billion yuan, an increase of 20.4%.

At present, the operating rate of the domestic tire industry remains high, and the production has significantly increased compared to the same period last year. This also indirectly confirms that the downstream demand for tires has gradually recovered compared to last year, and the prosperity of the tire industry is gradually entering an upward channel.

Responding to the "Double Anti" and Enhancing the Global Layout of Production Capacity

Despite the recovery of the tire market, the "double anti" tax rates in Europe and America still put pressure on the tire industry. Domestic tire companies have chosen to build factories overseas, and increasing production capacity for global layout has become the main path for the development of domestic tire companies.

According to import and export data, as of the end of 2022, a total of 13 domestic tire production enterprises have established 16 production bases overseas. Among them, overseas factories of companies such as Sailun Tire and Senqilin Tire have become important sources of profit for the company.

Industry insiders have stated that tire companies have shown a good recovery momentum in the first half of this year, especially with stronger recovery momentum for all steel tires. The recovery in demand, combined with favorable factors such as reduced sea freight and raw material costs, is expected to continue to repair the performance of tire companies in the second half of the year. (Transferred from: China Chemical Daily - Luo Ahua)