Five difficulties and six hot spots in China's tire industry

In the first half of 2022, the economic operation of China's tire industry continued the difficult situation since 2021 or the second half of 2021, with an industry-wide slump in overall profits and a "double drop" in production and revenue.

So, why is China's tire industry in such a difficult situation in the first half of this year?

Shen Jinrong, senior vice president of China Rubber Industry Association and chairman of Zhongce Rubber Group Co., LTD., believes that the difficulties of China's tire industry at this stage are mainly five aspects, and at the same time, it is facing hot spots in six aspects.

Five difficulties in China's tire industry at this stage

First, the "double carbon" goal has had a significant impact on China's tire industry

To achieve the "double carbon" goal, China's economic structure will usher in a major adjustment, steel, heavy chemical and other energy-consuming industries will be limited, the total amount of domestic cargo transportation will be reduced, and the demand for commercial vehicle tires, especially heavy truck tires, will be significantly reduced.

Data show that in the first half of the year, the national road freight volume 17.7 billion tons, down 4.6% year-on-year (the same below), truck sales fell 42.2%, and the related all-steel radial tire production fell by more than 20%.

Second, the impact of environmental protection policies on China's transportation market and tire market will continue

The mode of transportation "rotating iron" and "rotating water" are continuing to have an impact on tire demand. According to the data of China Freight volume, in the first half of 2022, railway traffic increased by 20% compared with the first half of 2019 in a normal year, waterway traffic increased by 15% compared with the first half of 2019, and road traffic decreased by 7% compared with the first half of 2019.

In 2019, China's total road traffic was 10 times the total rail traffic. Even if rail traffic increases by 20% in 2022, it is far less than the 7% decline in road traffic, so the overall volume is declining.

Third, the old problems restricting the development of China's tire industry have not been solved

The biggest problem restricting the development of China's tire industry - the problem of high tariffs on natural rubber imports has not been solved, and Chinese tire companies have to use composite rubber and mixed rubber with high quality difference.

Fourth, the new problems restricting the development of China's tire industry are becoming increasingly prominent

First, labor costs continue to rise.

Second, energy consumption and energy prices. Although the energy consumption index of China's tire industry is not too high, it is higher than the average level of the national manufacturing industry, and there should be hope that through the efforts of the industry, it can be close to or lower than the average level of the national manufacturing industry.

Third, environmental protection. Factory odor has been deeply imprinted on residents and environmental protection departments, hoping to have more scientific measuring tools and instruments to replace the artificial smell detection without dimensional standards and reduce high identification.

Fourth, the cost of raw materials. Cost volatility is normal, but now it has become a difficulty, at least two or more raw material prices are bound to rise. For example, carbon black, due to the limited production of iron and steel enterprises, resulting in a shortage of coal tar, which led to the skyrocketing price of carbon black.

Fifth, the domestic market demand is declining, and the rapid growth of exports will slow down

The output value structure of Chinese tire enterprises last year is about all steel tires: half steel tires: other varieties are 45:45:10. In the first half of this year, the production of all steel tires fell by more than 20%, and the decline in total demand is a large probability.

From the export point of view, the export delivery value of Chinese tire enterprises accounted for 43% of the total output value last year, an increase of 5 percentage points over 2021, with a growth rate of more than 16%. In the first half of this year, in the case of a decline in total sales, export delivery value accounted for more than 50%. The continuous double-digit growth of exports is not sustainable, and the second half of the year has shown a rapid decline in the situation.

Six hot spots in China's tire industry at this stage

First, the technological progress of China's tire industry is accelerating, and the gap between the level of tire manufacturing and the world's advanced level is rapidly narrowing

In the first half of the year, the proportion of national brand all-steel radial tires in the domestic market has far exceeded 90%, and the production decline of national brand tires is less than that of foreign brands.

Second, China's passenger car sales in the first half of the year reached 10.355 million units, up 3.4%, and it is expected that the annual production and sales will exceed the level of 2015.

The market share of independent brands in the first half of the year was 47.2%, up 5.3 percentage points. The sales volume of new energy vehicles reached 2.6 million, an increase of 1.2 times year-on-year, and new energy passenger vehicles have accounted for 24% of the total sales volume of passenger vehicles, of which Chinese brand new energy vehicles have accounted for 39.8%.

This is a very bright data, to the Chinese tire enterprises to bring more and more opportunities.

Third, with intelligent manufacturing as the lead, more new technologies will be applied to the field of tire production

In recent years, the application of digital technology in tire enterprises is accelerating, China's research depth and talent reserve in the field of digital is unique in the world, in the next few years, will always become a hot spot in tire manufacturing.

Fourth, the raw materials for tires, which are fossil organic compounds (or mixtures) represented by oil and coal, will continue to be high in price and low in quantity

The development and application of alternative new materials using renewable resources as raw materials will become a hot spot.

Fifth, a substantial increase in new energy vehicles, targeted development and promotion of new energy vehicle tires, will be an opportunity for Chinese tire companies, in this field, Chinese companies at least start not too late.

Sixth, China's total tire overcapacity will increase, and industry integration and elimination of backward production capacity are imperative

This is both a hot topic and a conclusion. Industry integration and the elimination of excess capacity are the laws of the market, and they are not transferred by people's will.