Cost & demand improvement, recovery for the main line of the whole year, 23-25 years of economic upswing

The price of raw materials has fallen from the high point and is now stable on the whole. Since 2020, due to the combined impact of climate, epidemic, rising crude oil prices, and downstream demand recovery, rubber prices have begun to rise, raising the cost of tire enterprises. Since 2023, the price of synthetic rubber and natural rubber has fallen from the high point in 2021, and is currently stable as a whole. In terms of carbon black, in 2022, the Russia-Ukraine conflict led to the supply of carbon black in Europe being blocked, and domestic carbon black exports increased significantly. According to Baichuan Yingfu data, in 2022, China's carbon black export price rose, the export volume was 810,300 tons, an increase of 12.3%, and the average export price was $1,633.83 / ton, an increase of 25.9%. Carbon black prices are now down from earlier highs.

Shipping prices have fallen sharply from previous highs, and export space has reopened. At the end of 2020, international shipping prices rose rapidly, mainly due to the impact of the novel coronavirus epidemic, the reduction of overseas port workers led to the lack of port loading and unloading capacity, the decline in the container turnover rate, and the surge in international oil prices increased the shipping cost, until September 2021, the global sea freight continued to rise. Since the second half of 2021, with the improvement of the global epidemic and the coordination of ports in various countries, shipping fees have gradually dropped. In the second half of 2022, sea freight prices fell rapidly. As of August 2023, the main Baltic container freight index has fallen by more than 85% from the previous high, which is already at a historically low level. The CCFI index for major routes also fell sharply back to its historical average. Although China's tire exports mostly use FOB mode, that is, the sea freight is generally borne by customers, but tire enterprises based on business strategy, customer cooperation, market competition and other factors, generally bear a certain freight, so the high operation of the sea freight will increase the operating costs of tire enterprises. On the other hand, during the significant drop in sea freight, the port turnover accelerated, and the tire inventory of overseas traders accumulated rapidly, which suppressed tire exports for a period of time. At present, the inventory of overseas dealers is digested, the superimposed sea freight is running smoothly and low, and the export space of Chinese tires is reopened.

3.3. Favorable preliminary results & overseas base production, 23-25 years profit is expected to accelerate upwardUs Department of Commerce anti-dumping investigation on Thai passenger car and light truck tires: On June 29, 2020, the United States Department of Commerce launched an anti-dumping investigation on passenger car and light truck tires in Thailand, and Thailand Linglong and Sumitomo Tire (Thailand Company) are mandatory enterprises to respond, and the investigation period is April 1, 2019 - March 31, 2020 (a total of 12 months). The original tax rate of Thailand Linglong was 21.09%, the original tax rate of Japan's Sumitomo Tire (Thailand company) was 14.59%, and the original tax rate of other Thai tire companies exporting to the United States was 17.06%. On September 6, 2022, the US Department of Commerce launched the first round of anti-dumping administrative review investigation on Thai passenger car and light truck tires, and Mori Kirin (Thailand company) and Sumitomo Tire (Thailand company) were forced to respond to the lawsuit. The survey period is from January 6, 2021 to June 30, 2022 (a total of 18 months). Mori Kirin (Thailand company) review preliminary tax rate of 1.24%, Japan Sumitomo Tire (Thailand company) review preliminary tax rate of 6.16%, other Thai export to the United States of tire companies review preliminary tax rate of 4.52%. The review is currently in the final investigation phase and the final decision is expected to be announced in the first quarter of 2024.

The preliminary tax rate of the review has been significantly reduced, and China's tire enterprises in Thailand are expected to benefit. At present, among the listed tire companies, Linglong tires, Senkirin, GM shares have built production bases in Thailand, and the anti-dumping tax rates implemented by the company to export passenger cars and light truck tires to the United States are 21.09%, 17.06% and 17.06%, respectively. The implementation tax rate will be reduced by 16.57pct, 15.82pct and 12.54pct respectively, which provides tire companies in Thailand with more opportunities to obtain orders and improve profit margins, thereby improving the company's overall profit and global operation ability. In addition, the significant reduction in the tax rate also indicates that China's tire enterprises have a stronger ability to participate in international competition.

2023-2025 will usher in the concentrated production period of overseas bases, which is expected to improve the profits of tire enterprises. At present, the profit level of the tire industry has improved, and the gross profit margin of the tire industry in 2023Q1 has been repaired to 17.43%, but it has not been repaired to the level of 2019. 2023-2025, China's tire companies such as Senkirin, Linglong tires, General shares, Qingdao Double Star and other overseas production bases are expected to put into production, because the gross profit margin in overseas markets is usually higher than the domestic, followed by tire enterprises overseas production capacity, the profit level of the tire industry is expected to continue to improve, the industry boom.