China’s Tire Industry Shows Sign of Recovery: Institute

China’s tire prices are likely to increase because of growth in demand and raw materials prices, said Shenwan Hongyuan Securities. The impacts of the U.S.’s anti-dumping and anti-subsidy probe weakened and China’s tire sales recovered gradually.

China’s export of tires to the U.S. has dropped to record low and shows sign of stabilization.

Meanwhile, impacted the anti-dumping and anti-subsidy probe of the U.S. against tires from China, numerous Chinese tire exporters turned to sell their products in the domestic market over the past two years and disturbed the market order.

Nevertheless, the production and sales of China’s tire companies recovered after bankruptcy, merger and acquisition, as well as reshuffle of marketing channels, and the entire industry is on the mend.

Raw material prices have bounced off the bottom and the market is to see higher tire prices. The price of natural rubber has risen from 9,000 yuan/ton to up to 11,000 yuan/ton since mid-February.

Other raw materials, such as styrene-butadiene rubber, butadiene rubber, nylon and carbon black, also rebounded because of re-stocking by tire producers.

With the stabilization of Chinese economy, the use of capacity among tire producers grew steadily and maintained above 70%. Some tire companies have already adjusted up their product prices due to higher raw material prices.

The securities broker rated Sailun Jinyu Group and Qingdao Doublestar at“accumulation”, and suggested investors to focus on Guizhou Tyre.

However, investors should be cautious of the anti-dumping and anti-subsidy probe of the U.S. against all-steel and semi-steel tires from China, continuous raw material prices growth, and moderate demand from the downstream.