Domestic tire market gradually warms up

As the overall performance of auto production and sales is better than expected, and the favorable factors such as the continued weakening of natural rubber raw materials prices, the domestic tire market is gradually picking up. After experiencing a sluggish share price in 2012, in 2013, the performance of listed tire companies represented by Jiatong Tire, Shuangqin shares, Saiwan shares, and Qingdao Shuangxing was promising, and the investment value would be apparent.

Upstream natural rubber prices lower

Internationally, Thai government officials recently stated that Thailand’s current measures to limit rubber exports will not continue after the expiration of May 31, but this move has failed to boost rubber prices. It is reported that Thailand, Indonesia and Malaysia are the world's three largest rubber producing countries, and the three countries account for about 70% of the world's total rubber production. In 2012, the three countries reached an agreement to reduce rubber exports by 300,000 tons, equivalent to 3% of global production. However, Indonesia and Malaysia will give up the measure after expiring in March this year, and Thailand will extend it until May 31st. Therefore, for some time to come, the market will usher in a period of concentrated release of natural rubber production.

In China, natural rubber in Yunnan, Hainan, and other provinces have also been successively cut. According to the data, as of April 26, the total rubber stock in Qingdao Free Trade Zone increased by 4,200 tons compared with April 15, and it has now reached 371,100 tons. If you count the delivery warehouses of the previous period, the spot prices of the ports, and the products accumulated in the rubber-producing countries in Southeast Asia, the total inventory of the entire rubber industry can reach more than one million tons.

The International Rubber Research Organization (IRSG) predicts that global natural rubber production will increase by 3.2% this year, and the pattern of oversupply will be difficult to break in the short term. At present, the latest price of natural rubber is around 20,000 yuan/ton. Compared with the price trend in 2012, it can be seen that the price of natural rubber is expected to fall from “2 eras” to “1 era”.

The China National Natural Rubber Association also believes that the unfavorable factors affecting the market price of natural rubber in 2013 are high, and the downward pressure on natural rubber at home and abroad is still relatively large. It is worth noting that the low price shocks of natural rubber raw material prices have provided a guarantee for the profitability of the tire industry.

Thanks to the gradual decline in raw material prices, the tire industry's net profit improved. According to the quarterly report, the profitability of many listed companies, such as Jiatong Tire, Shuangqin shares, Sailing shares, Qingdao Double Star, and Sheng Tire, all increased. In particular, Shuangqin shares, a quarterly report showed that the company's performance increased by 65.4% last year, the year-on-year increase in the first quarter of this year is as high as 127%.

Guo Jin Securities analyst Liu Bo pointed out that natural rubber prices in 2013 are expected to remain at a low of 25,000 yuan / ton, compared with the average price of 26,800 yuan / ton last year, there is about 6.7% decline in space, tire industry profit is expected to increase substantially. Taking rubber cost (natural rubber + synthetic rubber) as a percentage of 60% of tires and tire gross profit margin as 15%, a decrease of 6.7% in rubber price can increase the tire industry's sales margin by about 2.6%, and the industry's earnings will increase substantially.

Downstream car sales growth

Compared with the painful tragedy staged by the rubber distributors, the recovery of the downstream auto industry has made secretly the tire manufacturers in the middle of the industry chain secretive.

On May 9, the China Association of Automobile Manufacturers released monthly data. In April, domestic cars completed sales of 1,841,700, an increase of 13.38% year-on-year. At this point, from January to April, the production and sales of automobiles reached 7,296,600 vehicles and 7,266,200 vehicles respectively, an increase of 13.4% and 13.2% year-on-year, and the growth rate was 0.6 and 0.1 percentage points higher than that in the first quarter. According to the 2012 Statistical Bulletin published on the website of the National Bureau of Statistics, China’s total civilian vehicle ownership reached 120.89 million at the end of 2012, an increase of 14.3% compared to the end of 2011. The warmer car sales boosted the tire industry.

The data from the China Automotive Industry Association also shows that production and sales of passenger cars in April fell back from the previous month, but the year-on-year growth rate was still above 10%. From January to April, the growth rate of production and sales of passenger cars is around 16%, which is higher than the overall growth rate of automobiles. According to the latest data, the heavy truck industry sold a total of 81,300 vehicles in April, an increase of 30% over the same period of last year. At the same time, with the slow recovery of the world economy, the international automobile industry has rebounded and tire exports will increase. In particular, after the United States lifted the special tariff on China’s tires for three years after September 2012, China’s export of passenger tires is expected to increase substantially.

In addition, news that the new energy vehicle subsidy policy announced in the recent market is expected to be released during the year, Xu Chunhua, honorary chairman of the Rubber Industry Professional Committee of the China Rubber Industry Association stated that with the adjustment of the product structure of the Chinese auto industry, especially the new energy vehicles The development will drive the development of new structural tires such as green tires, energy-saving and environmentally friendly tires in China.

It is worth noting that the "Accounting Method for the Average Fuel Consumption of Passenger Vehicle Enterprises" was also implemented on May 1. It is expected that the demand for green tires will be significantly expanded. Insiders pointed out that listed company Zhongfeng Shen has previously taken the lead in the world in the promotion of non-toxic, low-carbon, fuel-efficient, retreadable green tires, the first to achieve 100% green radial tire manufacturing, is expected to benefit from it. Other notable stocks include Shuangqin shares and Saiwan shares.

Carbon blackboard block is expected to boost

Carbon black is the second largest raw material for the rubber industry. About 91% of carbon black products are used in the rubber industry. Among them, about 67% of carbon black is used for tires and 24% for other rubber products. Therefore, the recovery of the automotive industry determines the degree of rubber industry boom, but also determine the demand for carbon black.

Since the second half of 2012, the global tire demand has shown signs of recovery, and the domestic tire industry's profitability and operating rate have improved. At the beginning of March, Black Cat's shares generally raised the prices of its various types of carbon black by 500 yuan/ton, ex-factory prices such as N339 and N550 were reported at 9,500 yuan/ton, and currently 6 production lines are fully open. Longxing Chemical also raised the price of carbon black N375 by 400 yuan/ton, the current ex-factory price was 8,100 yuan/ton, and 10 lines were normally produced. Tire giants such as Michelin forecast 2013 global tire demand will once again achieve a 3% to 5% growth rate. Therefore, if the demand for tires returns to growth in 2013, it will benefit the carbon black industry. It is expected that the production and sales volume of carbon black in China will reach 4.1 million tons in 2013, an increase of 9% year-on-year.

About 80% of carbon black production costs are raw material costs, and the main raw materials can be divided into coal tar, eucalyptus, and ethylene tar, which can be substituted for each other. Therefore, fluctuations in raw material prices have a great influence on the profitability of carbon black. As the raw materials in China's ethylene production process tend to be lighter, the production of ethylene tar is reduced, and the price of ethylene tar is higher than that of coal tar. Therefore, the proportion of coal tar and eucalyptus oil in China's carbon black raw materials gradually increases. Since eucalyptus oil is a deep-processed product of coal tar, about 90% of the raw materials of carbon black in China are derived from coal tar. China's coal tar supply is sufficient to enable the carbon black industry to enjoy low cost and convenience.

Secondly, the cost of carbon black in foreign countries is high and the selling price of similar products is also higher than that in China. Therefore, the proportion of domestic carbon black exports will continue to rise in 2013. It is expected that the overall profitability of the carbon black industry in 2013 will be better than 2012.

Benefiting from the recovery of downstream automotive and tire industry demand, carbon black prices will come out in the future with low prices. Black Cat and Longxing Chemical will undoubtedly become major beneficiaries. Black Cat is the largest carbon black producer in China. Its production bases are located in East China, Northwest China, North China, and Northeast China, of which 40% are exported overseas. Longxing Chemical is also a listed company specializing in rubber carbon black production. Its main customers are: Michelin, Goodyear, Giti, Sumitomo, China Strategic, Double Money, Aeolus and others. In addition, as environmental standards increase and industry entry thresholds increase, small-scale carbon black companies will gradually withdraw from the market. In the future, industry leaders still have room to expand market share.