China's Tire Prices Showed an Uptrend

Restructuring of Dongying Tire Enterprises Gained 10 Billion RMB Financial Support from the Local Government

China's Tire Prices Showed an Uptrend

China’s Newly-Added Butadiene Capacity Around 2020

As some tire enterprises in Dongying faced capital shortage, the local government improved the financial support for the enterprise acquisition or restructuring. The subsidy volume was based on the emerged enterprise’s contribution to the local revenue and the economy. All merging enterprises would be awarded for 1 million RMB. The Dongying government has set a 10 billion RMB tire industry fund. With the financial support, the tire enterprises may overcome the difficulties.

The above table can tell us that China’s tire plants lifted the tire prices in August. Several plants even adjusted the prices frequently. SCI holds that the main reason for the price increase is the changes of the output and the sales. The supply decrease supported the tire prices. The supply control of the rubber feedstock dragged down the operating rates at the tire plants. Thus, the tire prices will still be stable-to-rising.

The operating rates at some tire plants in Shandong decreased by 20%, and the operating rates at most tire plants were stable. However, the operating rates had decreased to a relatively lower level previously. So the production and the output affected the tire supply.

Except the isoprene rubber and the state-owned SCRWF, prices of almost all tire feedstock increased notably. The price of NBR was up 8% M-O-M and up 37% Y-O-Y. The price of antioxidant also rebounded. Most of the additive producers halted production due to the environmental protection inspection and the safety production inspection. The short supply led to price increase. The increase of the feedstock cost pushed high the tire prices.

Besides, the demand for all-steel tires also increased greatly. The accumulative sales of heavy trucks were 673,300 in Jan-Jul, up 72.70% Y-O-Y. The sales volume in July was 94,000, up 89% Y-O-Y. The sales increase of the heavy trucks stimulated the demand for tires.

With the short supply, increasing feedstock prices and the high demand, tire price increase will be easy to understand. SCI predicts that the tire prices will undergo an uptrend in the near future.

According to SCI’s statistics, at least 7 ethylene projects will be put into use around 2020. The matched capacity of butadiene is about 900kt/a. There are still some light alkane cracking projects. The total newly-added butadiene capacity in China will be 1,000kt higher than the actual butadiene capacity in 2018. It is estimated that China’s butadiene capacity in 2020 will be 26% higher than the capacity in 2018. The capacity of newly-added butadiene projects in China increases more rapidly than that of synthetic rubber projects. As China’s synthetic rubber projects are put into production ahead of the production time of the butadiene projects, the China’s SBR, polybutadiene and SBS capacity will increase in the range of 5%–8%. Even if some ethylene projects are likely to have some planned matched downstream projects, it is certain that the butadiene supply in China will be quite ample after 2020.

As a whole, the capacity expansion of China’s butadiene industry around 2020 is a fundamental change for the butadiene industry and its downstream synthetic rubber industry. The profitability of the industry chain will also be restructured. However, uncertainties may exist with the capacity expansion. If the supply of butadiene is ample and the accessibility gets higher, the production cost of synthetic rubber will decrease. It is predicted that China’s synthetic rubber industry may face loose market conditions in the future.