Chinese Tire Industry Initiates New Round of Price Boom

Goodyear Dalian Tire Co., Ltd. announced on Nov. 1 that it decided to lift the prices of some tire products from Nov. 16.

The company emphasized that the reason of the price lifting was rubber price hike since the beginning of this year, so it adjusted the prices to ease the pressure of rising raw material costs.

A tire producer in Shandong province announced on Nov. 8 that it would increase the billing price of tires by 2% to 3% from Nov. 10.

Goodyear was the first tire giant announcing tire price lifting in public. Actually, a number of mainstream tire companies in China have adjusted up their product prices silently.

Before that, a few tire companies in Shandong announced price adjustment, including Shandong Huasheng Rubber Co., Ltd., Shandong Yongsheng Rubber Group Co., Ltd. and Qingdao Doublestar Marketing Co., Ltd.

Analysts attributed the upward price adjustment to the following reasons:

The first is rising raw material prices.

After the National Day holiday in early Oct., natural rubber price rose sharply, the prices of carbon black, steel cord and additives also went all the way up, increasing the cost pressure on tire producers.

According to Shenwan Hongyuan Securities, rising raw material prices pushed tire industry initiating the price boom.

The second is increasingly higher logistics prices.

After the enforcement of new policy on the loads of transport vehicles, the transport capacity of logistics companies has been restrained, thus affecting the tire industry.

The third is the exit of tire capacities in Shandong province.

Most capacities of China’s tire industry are gathered in Dongying, Shandong province. Those capacities are with low efficiency and high vulnerability to risks.

Domestic economic slowdown resulted in capital chain rupture of some tire companies in the city, and they are quitting the industry gradually.

Statistics show that 14 tire producers in Shandong have closed down.

A new pool of loans will due at the end of 2016, when a new group of tire producers in Shandong may have to quit the market for failing in paying back the loans.

As downstream auto demands increase, while tire supplies shrink and concentrate further, plus raw material price hike, a new round of tire price boom will continue.