Aug Semi-Steel Tire Market Review and Forecast
[Introduction] In August, the supply reserve in China’s domestic semi-steel tire industry went lower. Although the demand growth slowed down, the gap compared with last year gradually narrowed. In September, the increase in operating rate may be limited, and the increase in demand may be achieved in a difficult way as the reduction in the export may drag down the overall demand.
Supply Reserve Fell with Decrease in Operating Rate and Inventory
China Semi-Steel Tire Supply Index
In August, the overall performance of the semi-steel tire industry weakened, and the supply reserve showed a downward trend M-O-M. First, due to the staggering power consumption in some regions, producers cut production independently, and the operating rate decreased. Second, some producers stopped production this month, which significantly dragged down the overall operating rate. Third, producers’ sales underperformed, so they made production cuts under the great inventory pressure, which resulted in the relatively low operating rate.
Sales Growth Bogged Down
Semi-Steel Tire Market Monthly Operation Index
This month, as the sales volume in some regions increased significantly M-O-M, the overall semi-steel tire market trading improved from last month. At the same time, the market price saw limited changes. Although there was news about the price increase made by a few producers, most producers had sales promotions amid poor demand. China’s domestic semi-steel tire agents were not optimistic about the price increase, and most market players maintained procurement based on rigid demand.
Traditionally, in August, the auto market is highly likely to usher in a slack season of production, but the production in August 2022 did not fit the seasonal characteristics, that is, the auto production remained robust. In August, 2.116 million passenger cars were produced, up 41.9% Y-O-Y but down 1.9% M-O-M. The measures to ensure the supply of the industrial chain were effective. Affected by the continuous high temperature and low rainfall during the month, a large-scale summer drought occurred in the Yangtze River Basin. As a result, some areas in Southwest China experienced a shortage of power supply for several days, so some enterprises in the automobile industry chain were not able to produce in an orderly manner. Some enterprises in Sichuan and Chongqing stopped production for a long time. At the same time, the promotions in the auto market remained at a high level in August. Mainstream auto producers all added sales promotions to make up for the loss of sales earlier and strive to achieve the annual target.
Sep Forecast
Supply: In terms of operating rate, as the influence of the high temperature subsides in September, producers’ operating rates may recover slightly. China’s domestic sales volume is expected to recover from last month, but the expected slowdown in exports tapers down the confidence in the recovery of China’s domestic semi-steel tire market. The overall operating rate may be stable-to-rising. In terms of inventory, to preserve cash flow, producers may control the inventory of finished products. Besides, with the decline in feedstock costs, traders hold certain expectations for tire price reductions while strengthening inventory control.
Demand: In the OE tire market, with the policy to stimulate auto consumption and the fading of high temperature, the production and sales of passenger vehicles are expected to maintain an upward trend, and SCI is cautiously optimistic about the demand for OE tires. In the replacement tire market, although consumers are still cautious about travel, with the arrival of peak season in September, business travel is expected to increase, and the demand for replacement tires may recover steadily. In terms of export markets, overseas demand faces downward pressure under the background of high overseas inflation. However, global energy prices are high, so the production costs increase by a large margin, which restricts the production capacity. Therefore, China’s semi-steel tire exports still have certain advantages. However, because the export base in the previous period has been at a relatively high level, the tire export in September may decrease from last month.
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