Feedstock Prices Rebounded, Bolstering Semi-Steel Tire Price
Snapshot: In 2023, the prices of tire feedstock declined continuously, easing the cost pressure on China’s tire production. However, the feedstock prices bottomed out and rebounded in Q3, and they climbed constantly, leading to a rise in the cost of tire production. The rising cost lent support to the price of semi-steel tires. It is projected that the semi-steel tire price is not likely to drop.
In the weight of a semi-steel tire, synthetic rubbers account for 26.95% of the total, ranking first. Carbon black takes up 26.74%, ranking second. Natural rubber accounts for 22.53%, ranking third. Other chemical accessories take up around 7.85%. Therefore, the cost of semi-steel tires is highly influenced by the prices of natural rubber, synthetic rubbers and carbon black.
In 2023, the prices of tire major feedstock declined continuously. The carbon black price crashed especially. In May, the monthly average price of carbon black fell to RMB 7,061.9/mt, which was 36.38% lower than the highest price in recent two years. Meanwhile, the prices of natural rubber, PBR and SBR all showed downtrends. In addition, the prices of rubber accessories also dropped. The cost of tire production dropped significantly, making semi-steel tires a strong expectation of price cuts. Recently, the prices of major tire feedstock rebounded, driving up the cost of tire production, which underpinned the tire price.
The tire cost was in a period of rising.
In Jan-May 2023, the cost of semi-steel tire production slid continuously, as the prices of tire major feedstock trended down. Since April, the carbon black price has been falling, leading to a larger M-O-M and Y-O-Y decrement in the cost of semi-steel tires. In May, the production cost of a semi-steel tire (weight: 10kg) fell to RMB 144.15/piece, down 2.97% M-O-M and down 9.56% Y-O-Y. However, the tire cost has been rebounding with the prices of carbon black and synthetic rubbers rising since June. Thus, expectations for tire price cuts faded.
The pressure of excessive tire cost transmission got eased.
Tire cost transmission index is the unique data of SCI. When the cost transmission index is >0, it indicates that the tire cost transmission is incomplete, and there is pressure on producers. When the cost transmission index is ＜0, it indicates that the tire cost transmission is excessive, and there is pressure on demand. Since H2, 2022, the cost pressure of tire production has been eased with rubber prices sliding. Thus, the cost transmission index of semi-steel tires declined. Since March 2023, the carbon black price has crashed, leading to a further decrease in the production cost. Up to May 2023, the cost transmission index of semi-steel tires fell to -4.32. With excessive cost transmission, the semi-steel tire price was highly expected to decrease. However, the prices of carbon black and synthetic rubbers rebounded, driving up the tire cost. But the overall tire prices changed slightly, easing the pressure of excessive tire cost transmission. Therefore, expectations of semi-steel tire price cuts faded to some extent.
The semi-steel tire price trended flat.
In 2023, China’s prices of tire major feedstock dropped, leading to a decrease in the tire cost. Thus, the tire prices were expected to decline. However, since June-July 2023, the feedstock prices rebounded, driving up the tire cost. The cost pressure on the tire prices got eased. Besides, the tire exports have been strong since 2023, bolstering the overall sales of tires. The inventory at semi-steel tire enterprises was relatively low. Tire enterprises showed thin interest in cutting prices. It is expected that the semi-steel tire price may remain stable.
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