China All-Steel Tire Market Stable-to-Declining in May

In May, the rubber market remained relatively sluggish overall. During this period, feedstock prices trended up at some times, driving up the tire market in the short run. Besides, players adopted a bullish sentiment in the market. Meanwhile, downstream markets ebb and sales market underperformed. Under the price dive policies at some tire enterprises, the purchase volume peaked temporarily, which failed to last for a long time.

Natural rubber: Prices of natural rubber first upsurged and then fell back in May. The output was stable in the production areas both at home and abroad. The inventory pressure was relieved gradually in China. Downstream users kept rational inventory and purchased on a need-to basis. The supply and demand fundamentals remained steady. However, the news side mainly affected the market fluctuation of natural rubber. Those influencing factors were involved in the trade consultation between China and the U.S., apple futures market fluctuation, price increase in cotton and so on. In addition, rubber markets stayed at lows for many years, which brought some opportunities in fund influx.

SBR: China’s ESBR market offers edged up in May, based on the following aspects. The supply of feedstock butadiene was tight, thus the butadiene prices were high relatively. Besides, the butadiene unit at PetroChina Jilin Petrochemical was shut down for maintenance. Some SBR enterprises cut the operating rate pressured by high cost. Within this month, the average operating rate of ESBR units was less than 50%, which lent some support from the supply side. Mainstream sales companies didn’t suffer obvious marketing pressure and they uplifted the ESBR ex-works prices by RMB 500/mt this month. However, the fundamentals contradiction still existed in natural rubber market, and prices of natural rubber stayed at lows. The price spread between ESBR 1502 and natural rubber was around RMB 2,000/mt. Downstream users purchased on a need-to basis for the ESBR, and the whole trading atmosphere was lukewarm in the market. SCI estimates that China’s ESBR offers will soften in May.

PBR: Market offers for HCBR inched up in May. As seen from the feedstock, the butadiene ex-works price increased by RMB 1,000/mt totally in May. Some private enterprises were in units’ downtime period gradually. Besides, China-U.S. trade war suspended, stimulating the upsurge in natural rubber prices. Mainstream suppliers uplifted the PBR ex-works price by RMB 200/mt, and market offers went higher accordingly. And then, with bullish factors fading, natural rubber futures at Shanghai Futures Exchange dropped. In addition, downstream demand was weak. Market offers called back.

Tire: Prices of all-steel tire was stable-to-decreasing in May. Prices of warranted tire basically remained stable. Tire producers who adjusted the price mainly cut the tire price by around 2%. Sales were average in China’s tire market and those were better in H2 of May due to the annual tire exhibition. In June, tire producers still suffered high sales pressure. Thus, with the weather getting hotter, sales will tend to a good development in China’s tire market. SCI estimates that the whole tire market will still be stable and some flexible promotion policies will be issued in a bid to boost the market.