Slow Improvement of Semi-Steel Tire Market
[Introduction] As residents’ travel increases with the transportation getting better, the semi-steel tire market is slowly moving forward. However, the market digestion capacity is limited, resulting in high inventory and limited capacity release of producers. Traders have insufficient confidence, and producers’ sales pressure remains unabated. It is feared that the implementation of price rise of some brands may be delayed again and again.
In May, the trading in the semi-steel tire market was still flat. The market activity was not strong, and the demand was weak. Although the sales volume of semi-steel tires changed for the better this month, due to insufficient confidence of traders, agents still maintained low inventory and lack enthusiasm for purchasing. Therefore, even if producers pushed up the tire price under the pressure of high cost, the transmission of price rise in the market was not smooth.
Passenger car production and sales decreased Y-O-Y and M-O-M
In April, automobile production and sales decreased significantly, meeting the lowest monthly level compared with the same period of the past decade. The production of passenger cars was 996,000, down 47.1% M-O-M and 41.9% Y-O-Y, and the sales volume was 965,000, down 48.2% M-O-M and 43.4% Y-O-Y. Uncertainties still existed in China’s domestic market. The operation pressure of the automobile supply chain was high, and the output of automobile plants in some regions was still insufficient. In addition, private car travel was limited. At the same time, the consumption capacity and confidence of residents decreased. Affected by this, the demand for semi-steel OE tires declined significantly on M-O-M and Y-O-Y basis. SCI estimated that the demand volume for passenger car OE tires in April was 4.98 million, which decreased by 41.9% from last year.
Source: China Association of Automobile Manufacturers
Source: China Association of Automobile Manufacturers
Exports decreased Y-O-Y and M-O-M
In 2022, China’s semi-steel tire export ran at a high level. In April, the export volume of semi-steel tires was 181.95kt, down 6.82% M-O-M and 0.86% Y-O-Y. Except for the Y-O-Y increase in semi-steel tire export volume in January, the export volume from February to April was lower than that of last year. Although China’s domestic logistics and transportation environment improved somewhat, there was still a gap in transportation capacity compared with the normal level. Besides, the pressure of turnover still existed in a few ports. The turnover rate was low, affecting delivery efficiency. However, the tough overseas demand supported the high level of China’s passenger car tire exports in April, and the gap with the same period last year narrowed.
Insufficient market consumption capacity and low inventory at agents
Since March, consumers’ travel has been limited. The road trip was limited even during holidays. Besides, after the resumption of work and production in April, many plants adopted the bubble strategy, and many personnel in other plants traveled back and forth between work and home. Therefore, the overall demand for semi-steel tires was limited, and most agents said that their overall sales volume was lower than that in the same period last year. In May, the expressway remained unobstructed, and the travel of consumers increased, so the market demand for semi-steel tires picked up compared with April. However, due to high oil prices, cautious long-distance travel and limited consumption capacity, the end demand for semi-steel tires saw limited improvement. In May, agents still controlled the inventory to reduce the inventory pressure as much as possible.
Forecast
Feedstock: Next month, prices of natural rubber, the main feedstock of tires, are expected to show a strong trend. Prices of synthetic rubber are expected to fluctuate within a narrow range, and the average price may increase from May. At the same time, prices of carbon black may remain high. Overall, it is expected that tire producers will still face the pressure of high production costs.
Demand: In terms of the OE tire market, the production of passenger cars recovered somewhat in May, but it has not recovered to the normal level. It is expected that automobile production will increase further in June with the automobile consumption stimulation in many regions and the recovery of the automobile industry supply chain, and the passenger car OE tire demand will be improved. In terms of the replacement tire market, with the improvement in travel and the coming of Summer, China’s demand for changing tires is expected to get better, and the demand for replacement tires may register a slower but stable performance with good momentum for growth. In terms of export, it is expected that the tire export orders may be passable, but the overseas demand may turn weak under the pressure of high inflation.
Supply: At the beginning of June, many tire producers are expected to reduce or suspend production during the Dragon Boat Festival holiday. Besides, the overall sale volume may be unsatisfactory and the inventory at producers may be high, so the operating rate of tire plants may see limited increases. With the coming of the peak season of demand, the sales in the market are expected to be improved. However, due to the lack of confidence, agents are expected to control the inventory in June.
To sum up, most tire producers are expected to maintain low operating rates. The sales in China’s domestic market are expected to improve supported by the seasonal demand. However, the insufficient confidence of traders will result in the slow digestion of producers’ inventory. Producers’ sales pressure may continue unabated, and the implementation of price increases of tire brands may be delayed.
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