In 2009, the rubber tire industry was driven by the automotive industry and the machinery industry. It soon emerged from the trough in the fourth quarter of 2008 and achieved rapid development. The price of raw materials fell sharply (50%) and product prices fell slightly (5%). As a result, the gross margin level of the industry has increased by 5-10%, and the “blowout†of the business has reached the highest level in history. Tyre industry analysts believe that it is impossible for the tire industry to maintain significant growth in 2009. However, driven by the demand from the automotive industry and the machinery industry, it still maintains a high level of profitability, but the growth rate has rapidly declined.
2009: The tire industry "blowout" reaches the highest in history
The unprecedented prosperity of the tire industry in 2009 was defined by the industry as "blowout." According to China Tire Business Network, tire production in 2009 was 655 million, an increase of 18% over the same period last year.
The main reason for the blowout in the tire industry is the rapid growth of the automotive industry. In 2009, China's automobile production was approximately 13.79 million, an increase of 48% year-on-year; the number of automobile sales during the same period was approximately 13.64 million, an increase of 46% year-on-year. The production and sales volume of automobiles both hit a record high and ranked first in the world, far higher than the 5% increase in output and the 6% increase in sales volume in 2008. In addition, the rapid growth of the machinery industry is also one of the boosts for the “blowout†demand of the rubber tire industry. In 2009, the gross output value of the machinery industry increased significantly by 33% year-on-year.
Another reason for the “blowout†in the tire industry is that the price of tire raw materials has dropped significantly. The prices of natural rubber and synthetic rubber, the main raw materials for the tire industry, fell by about 50% in early 2009. This made the cost of the tire industry drop in 2009, and the gross margin level increased by about 5%. This point can be confirmed from the operating conditions in the first three quarters of the industry. The performance of the entire industry in the first three quarters has reached the highest level in history.
2010: Tire industry is “very warm†and profitability is at this high level
In 2010, due to the deceleration of demand growth and the rise in raw material prices, the tire industry could not continue to “blowout.†Considering the continuous growth of demand, it is still possible for the tire industry to maintain a high level of profitability, at least higher than the profitability of the industry before 2009.
Under the influence of the United States tire special security case, other countries have successively imposed relevant tariff sanctions on the Chinese tire industry. For the Chinese tire industry, which accounts for 40% of exports, the export market is unlikely to grow significantly. Therefore, the driving force for continued growth in demand comes from the growth in the domestic market, and the automotive industry and machinery industry continue to grow. First, in 2009, the number of motor vehicles reached 186 million, of which 76.19 million were automobiles. This figure means that the future tire industry maintenance market is huge. Second, China is currently the world's largest automobile country. From the perspective of the growth of auto demand, the 15-20% growth rate in the next two years can be maintained. With the increase in car ownership, the replacement of the tire market will further increase.
In addition to the automotive industry, the machinery industry is also one of the downstream markets of the rubber tire industry, accounting for about 10%. China is in the mid-stage of industrialization. Many large-scale infrastructure projects will still be launched in the future. For example, large-scale infrastructure projects such as Western Development, South-to-North Water Transfer, West-East Gas Transmission, and railway construction, as well as the development of mineral resources, have given strong support to the construction machinery industry. According to China Construction Machinery Information Network, the construction machinery industry is expected to maintain a compound annual growth rate of 15% for the next three years, which will drive the demand for construction machinery tires.
According to the "Eleventh Five-Year Plan" and prediction of the Rubber Industry Association, China's total tire production will reach 700 million by 2010. The total tire production and radial tire production will achieve rapid growth. The average annual increase in the tire industry in the next five years About 10-15% speed.
Although the pressure of rising prices of natural rubber as the main raw material continues, but under the support of demand, the tire industry can achieve part of the cost shift through price increase, maintaining the industry's higher profitability. Compared with 2009, the tire industry in 2010 did not have a significant increase in the price of natural rubber. Compared with 2008, the tire industry in 2010 definitely has strong support for demand.
1998-2009 China's tire production and its year-on-year growth
Sales and Growth Rate of China's Automotive Industry from 2003 to 2009
The proportion of the three major demand segments in China's tire market in 2009
Comparison of Vehicle Ownership and Production in China from 2003 to 2009
Natural rubber is a key factor in the gross margin of the rubber tire industry
China's tire industry is low in concentration and competition is fierce. The top ten companies in the industry have a market share of about 30%, and China Jiatong, which ranks first, accounts for only 10%. All steel tires are domestically-funded enterprises with strong competitiveness. In recent years, more capacity has been built, and the concentrated release of production capacity will intensify competition in the industry.
Under the delicate and delicate market pattern of intense competition within the tire industry, external raw material prices have become a key factor in determining the profitability of the industry. Natural rubber accounts for the largest proportion of raw materials. Therefore, the price of natural rubber has become a key factor in the level of gross profit margin of the tire industry.
Specifically, the main raw materials for tires are natural rubber and synthetic rubber (45-50%), steel cords (15%), cord fabrics, and carbon black (24%); among them, the proportion of all-steel tire natural rubber is as high as 45%. Therefore, natural rubber prices have a significant impact on the company's profitability.
From the perspective of long-term supply and demand, natural rubber is a renewable resource product, and the yield is affected by the planting area and natural conditions. The downstream demand is mainly rubber enterprises. In addition, Southeast Asia is the main producing suburb, and the transportation cost from China is the lowest. Therefore, from the perspective of supply and demand, the supply and demand of natural rubber is not tight, and it can be regarded as a balance between supply and demand. Excluding the hype factors, the future will be driven by a strong demand and inflation will drive the rubber prices to rise steadily. The high gross profit margin cannot be maintained in the long term.
2006-2009 prices of natural rubber and synthetic rubber
Construction of raw materials for radial tires and its weight proportion
China Tire Business Network industry analysts believe that the tire industry is unlikely to continue to grow significantly after “blowouts.†With the continuous growth of the automotive industry and the high prosperity of the machinery industry, the overall profitability of the industry remains at a high level. It is expected that the demand growth of the tire industry will remain at a level of 10-15% in the next two years.
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