Q3 Tire Markets Production and Sales Mixed, Q4 to Weaken
Introduction: In Q3, the all-steel tire and semi-steel tire market trended differently. The production and sales of all-steel tires faded, while those of semi-steel tires remained strong. Looking ahead to Q4, the demand slack season of the all-steel tire market is expected to approach, when the production and sales may both slide. At the same time, the production and sales of semi-steel tires are likely to face headwinds in rising and may even drop from highs.
In Q3, production and sales of all-steel tires were out of balance while those of semi-steel tires both increased.
According to SCI, the production and sales of all-steel tires continued the imbalance in Q3, while those of semi-steel tires were in a tight balance. In Q3, the total output of all-steel tires was around 34.1 million pieces, and the sales volume was expected to be around 30.3 million pieces. In contrast, the total output of semi-steel tires was around 163.7 million pieces, and the sales volume was estimated at around 169.4 million pieces. In terms of the all-steel tire market, the end demand was inadequate, and there were frequent production suspensions and cuts in Q3. In addition, the high inventory curbed the capacity release to some extent. In contrast, the production and sales of semi-steel tires both trended up driven by fairish domestic and overseas demand.
The operating rate of the all-steel tire industry fluctuated downwards, while that of the semi-steel tire industry hovered at highs.
According to SCI’s data, the operating rate of the all-steel tire industry edged up after a continuous fall in Q3. Under the pressure of weak end demand and high inventory pressure, some tire enterprises suspended or cut production in July and August, dragging down the overall operating rate. After the influence of holidays and production suspension was eliminated, the operating rate of the all-steel tire industry trended up in September. In contrast, the operating rate at semi-steel tire enterprises was relatively stable, mainly boosted by domestic and overseas demand. As for the changes in the quarterly output, the total all-steel tire output in Q3 declined by 3.16% QoQ and 6.77% YoY, while the semi-steel tire output increased by 0.43% QoQ and 4.29% YoY.
The demand for all-steel tires was sluggish, while that for semi-steel tires was fairish.
From the perspective of tire demand markets, the replacement tire market slowed down in Q3 compared with Q2. At the same time, the OE semi-steel tire market strengthened, and the semi-steel tire exports trended up strongly. However, the volume of OE all-steel tires slid notably. The all-steel tire exports increased somewhat.
As for the demand market of all-steel tires, the production capability at commercial vehicle enterprises gradually improved fueled by the end of hot weather and the demand peak season in September, which bolstered the overall output in Q3. According to SCI, the total output of commercial vehicles in Q3 dropped by 18.6% QoQ and 12.66% YoY. The volume of OE all-steel tires followed the changes in the commercial vehicle output. Due to the weak end demand, no obvious replenishment was seen in the early stage. After mid-September, the atmosphere of price increases in the tire market gradually heated up. Distributors stocked up all-steel tires intensively to avoid high prices, driving up the increment in the replacement all-steel tire volume. Yet, it failed to reverse the decline in the demand for all-steel tires in Q3. There was still some demand gap in the export market, and the new improvement in the export structure underpinned China’s tire exports. SCI reckons that the total exports of 40112000 in Q3 were expected to rise by around 1.60% QoQ but fall by around 1.28% YoY.
Regarding the semi-steel tire demand market, the local vehicle replacement and renewal policies took effect in succession as the national support strengthened in Q3, and automobile enterprises launched new products for autumn, so the passenger car market warmed up somewhat. As the data shows, the total output of passenger cars in Q3 rose by 7.60% QoQ but fell by 1.93% YoY. Accordingly, the demand for OE semi-steel tires ramped up. The continuous hot weather boosted the end demand for replacement tires. Besides, the high feedstock prices propelled players’ bullish sentiments, spurring active replenishment at traders, thereby triggering a rise in the demand for replacement tires. The export market was the key driver for the rise in semi-steel tire production and sales in 2024. SCI reckons that the total export volume of 40111000 in Q3 may rise by around 10% QoQ and 20% YoY.
Looking ahead to Q4, it is projected that China’s tire market may fade, among which the all-steel tire market will possibly see declines in production and sales with the demand slack season approaching. In contrast, semi-steel tire production and sales are likely to face headwinds in rising or even drop from highs.
The trend of the monthly tire output from Q1 to Q3 was basically in line with the seasonal characteristics. Unless any disturbance appears in the market, the tire output is more likely to follow seasonal characteristics, which may change narrowly first and then drop.
SCI reckons that the all-steel tire output in Q4 may drop by 2% QoQ and 4.5% YoY. The total output in 2024 is expected to decrease by around 3% YoY. The semi-steel tire output in Q4 may hover at highs, which is anticipated to drop slightly from Q3 but rise by 5.5% YoY. The total output in 2024 is expected to increase by over 8% YoY.
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