The mode of use of tires

The price increase of container shipping has roughly experienced five stages:

In the first stage (2020.2~2020.6), the shipping market performed poorly under the epidemic, but the consolidation price was relatively stable, mainly because banks intervened to maintain the stability of freight rates.

The second stage (2020.6~2020.10) - the demand in the United States is released, and the freight rate of the US-West route is increased. On the one hand, the market supply and demand in the peak season, on the other hand, enterprises also have inventory demand, the market did not expect the United States line demand outbreak so fast, resulting in the United States line capacity is not enough, freight rises.

The third stage (2020.10~2021.2) - with the rise of freight on the European line, the container price ushered in a global general rise, and the situation of "one box is difficult to find" appeared. Due to the outbreak of demand in the United States in the early stage, a large number of containers have turned to the United States, and the supply of containers on major routes such as the European line is insufficient, which has pushed up global freight costs.

The fourth stage (2021.2~2021.4) - the traditional off-season, freight has been adjusted back.

The fifth stage (2021.4 to date) - market expectations change and speculation emerges. The sharp increase in the price of container transportation in the early stage has brought about changes in market expectations, and speculators have appeared in the container market, and the number of small boats in the port has increased, which has aggravated the port congestion, and the market has a certain imbalance.

Global car core shortage to car sales decline, affecting the supporting market

The global automotive industry has a serious lack of core, coupled with the implementation of comprehensive national six, domestic automobile production and sales have declined, affecting the sales of tire supporting markets. In the second half of 2020, the performance of the global auto market under the epidemic exceeded expectations, on the one hand, car companies did not expect a strong rebound in the auto market, on the other hand, the global consumer electronics market increased demand under the impact of the epidemic, resulting in chip production capacity transferred from the automotive industry. In 2021, semiconductor manufacturers in Japan, the United States and other places were forced to temporarily suspend production, and Malaysia's sealed test plant was also temporarily shut down by the epidemic, resulting in greatly limited chip production capacity. And with the continuous implementation of the six countries, commercial vehicle sales have declined. In the second half of 2021, domestic automobile production and sales were less than the level of previous years, down 7.53% and 11.09% respectively.

The resolution of negative factors in the industry

In response to the double reverse, domestic leading enterprises actively go to sea

Head tire enterprises actively respond to the double reverse investigation, put into production in a timely manner, and in recent years, the production and sales scale of overseas factories of Chinese tire enterprises has continued to expand. In 2015, the United States made a final decision on the double counter-investigation of passenger car and light truck tires exported by Chinese enterprises, and domestic head tire companies such as Cywheel tires, Linglong tires, Zhongce Rubber, Senkirin, Qingdao Double Star, etc., have set up factories at sea before and after 2015, effectively avoiding the impact of tariffs. As of 2020, the total output of overseas tire factories of Chinese tire enterprises has exceeded 51 million/year.

Chinese tire companies continue to expand overseas. Sailun Group, Shandong Linglong, Jiangsu General, Guizhou Tire, Qingdao Senkirin, Shandong Jinyu, Shandong Haohua and other enterprises have planned to build production capacity overseas, of which Sailun Group Cambodia plant has been officially put into operation on November 18, 2021. The global layout of Chinese tires is not decreasing.

The global tire consumer market is mainly in Europe, North America and Asia, and the domestic market is broad. Since 2017, global tire sales have averaged about 1.76 billion pieces/year, of which 2020 has declined due to the impact of the epidemic, and sales have rebounded in 2021. In 2021, Europe, North America and Asia combined accounted for about 84% of tire sales, which is the main market for global tire consumption, accounting for 28%, 24% and 32% respectively. Among them, Chinese tire sales account for a relatively high proportion of sales in 2020, accounting for about 20%, and there is enough capacity to digest space.

Tire enterprises and natural rubber prices are difficult to maintain high prices

Recent tire price increases are frequent, and it has experienced many price increases since 2021. In March and April, dozens of domestic tire companies issued price hike notices, some companies raised prices for a full range of products, and a few companies raised prices several times in the short term, with price increases ranging from 2% to 6%. Since August last year, domestic tire companies have experienced three price increases, respectively in August last year, October-November and December, of which the highest price increase can reach 7%.

The transmission of tire product price increases is not smooth, and some enterprises have increased tire inventories in 2021. Under the background of rising raw material prices combined with rising sea freight and weak domestic demand, tire companies' price increases are not smooth to the downstream or export, and the tire inventory of listed companies such as Cylun tires, SenQilin, General Shares, Linglong Tires, Qingdao Double Star and Guizhou tires has increased in 2021. Among them, the tire inventory of Cylun tires, SenQilin, Linglong tires and Guizhou tires increased by more than 30% year-on-year.

It is expected that the overall growth rate of natural rubber downstream tire demand will slow down in the future, and the supply side has not seen significant capacity reduction, so its price may be difficult to maintain a high level. 2002-2011, China's rapid economic development, natural rubber downstream demand is strong and the supply is relatively insufficient, in addition to the impact of the financial crisis in 2008, natural rubber prices are generally on the rise, this period the highest price of natural rubber to about 43,000 yuan/ton. Since 2011, on the one hand, China's economic growth began to slow down, auto production and sales have reached a peak, natural rubber downstream demand growth slowed down, on the other hand, the early expansion of rubber trees began to mature, in recent years, the supply side capacity has not been reduced, natural rubber supply and demand relationship has been reversed, In the past three years, its price has fluctuated between 11,000 and 14,000 yuan/ton. According to this analysis, the price of natural rubber will remain low in the long run, and its price trend has shown signs of reversal in the short term.

Consolidation is showing signs of easing, and the consolidation cycle is nearing an end

The container market is expected to show some signs of easing. The shipping industry is obviously affected by macro-economy and is a typical cyclical industry. Reviewing the operation of the container shipping market in the past 20 years, it can be found that the price change cycle of container shipping is roughly 2-3 years. Since the second half of 2020, the current stage of container price increase may have ended, and the container market is expected to show signs of easing.

The market is actively responding to the problem of vehicle core shortage, and the shortage situation is expected to improve

The supply shortage of automotive chips is expected to improve, and the tight supply and demand of chips at the end of the year is expected to gradually dissolve. First, the affected fabs and sealed test plants have gradually recovered from the disaster and epidemic, and the original production capacity has been reused; Second, TSMC, Intel and other chip manufacturers have announced plans to build factories, which is expected to inject new capacity for automotive chips; Third, domestic automobile enterprises and various investment institutions actively seek domestic chip replacement, and the automotive chip industry chain is expected to increase in the domestic distribution.

Tire industry boom is expected to reverse

In the short term, the negative impact on the tire industry began to dissolve, and it is expected that the prosperity of the tire industry will usher in a reversal. In terms of "double counter-investigation", Chinese enterprises have actively expanded overseas production capacity in recent years, effectively avoiding the impact of tariff policy on tire exports, and in the context of the epidemic, China, as one of the main markets for tire consumption, has also digested most of the production capacity of the tire industry, and the impact of trade policy on tire companies has gradually narrowed. In terms of raw material prices, the supply of natural rubber is not reduced, the price is difficult to maintain a high level in the long term, and it has begun to decline in the short term, and the cost pressure of tire companies has declined. In terms of freight prices, the cyclical market is obvious, the congestion of the port of Los Angeles in the west of the United States has been alleviated, and tire exports are expected to recover. In terms of automobile production and sales, the lack of core began to ease, the decline in automobile production and sales narrowed, and the production and sales of new energy vehicles were strong, boosting the downstream supporting market.