Shandong is China’s most important tire production area. In 2017, the output of radial tires in Shandong was 327 million, accounting for more than 50% of the country’s total output. Among them, the Dongying region was the most important one, accounting for about 50% of Shandong’s output. As far as product types are concerned, Dongying radial tires account for about 70%, semi-steel tires about 30%, and the ratio of beveled tires is very small. Exports account for about one-third of the total. Since the beginning of this year, China’s tires have been poorly produced and sold, which directly drives the downstream natural rubber market to be weak. From the perspective of the matching tire market, the performance of automobile production and sales, especially heavy trucks, has always been bright, obviously better than expected, and the overall consumption is poor. Domestic weaknesses in replacing the market.
In order to penetrate into the industrial chain terminal, there is an intuitive understanding of the status of production of domestic tire companies, and there is a more intuitive judgment of the development trend of natural rubber in the third quarter. On June 12, the author’s group entered the Dongying region and conducted field research. In this process, we learned about the company’s operations this year, raw material and finished product inventory, recent order signing, third-quarter market views, and the use of raw materials. Companies generally believe that the market performance this year is not as good as the same period of last year, but it is better than the excessive pessimistic expectation of this year at the end of last year. Due to the low raw material prices, the current use of mining with the mining mode, the raw material inventory is low, mostly in 10-15 days. Since the beginning of May, the domestic market has entered the off-season and the market is not in good condition. The situation will continue until around July. In August-October, due to high temperature weather, tire wear will be accelerated, and the market is expected to improve, but the tire operating rate is generally lower. Impact, off-season tends to increase the inventory of finished products.
Overall, the tire terminal application pressure from June to July, but the impact on the tire operating rate is relatively small, in the current natural rubber stocks rebound, the supply of heavy quantities, natural rubber is difficult to rise slightly, the price will continue to pressure. However, due to the current low prices of raw materials, if there is a substantial decline, tire companies may increase the inventory of raw materials, so the next two months, it is expected that the price of natural rubber may decline, but the space is expected to be limited.
A company
Overview: Only production of steel tires, the daily production capacity of about 3,000, mainly located in the domestic replacement market, accounting for about 85% of total production, the type of plastic used is domestic 9710.
Operational situation: The difficulties of tire companies this year stem from several aspects. First, the domestic market demand for replacement tires is not good. On the other hand, national policies lead to tighter bank funds, but there is no impact on tire production capacity. On the export side, it will be affected by the trade war, but due to the fact that the company exports fewer tires, it will be less affected.
Operating rate: Overall, this year’s tire production and sales performance is worse than last year, but better than previously pessimistic expectations. This year, the average operating rate of enterprises has been reduced, and currently there are about 70%. The factory of the factory is small in scale, and the operating rate is relatively stable this year, about 80% to 90%, but some companies have poor operating rates.
Inventory: The current raw material market pressure is smaller than before and after the Spring Festival. The impact of the Shanghai Summit is relatively small. Before that, the inventory of raw materials was slightly increased. Currently, it is normal, standing inventory is 20-30 days, and the raw materials are kept with the use of mining materials. In terms of finished product inventory, this year’s sales are general and start-ups have been reduced. At present, the finished product inventory is normal.
Expected market outlook: Spring Festival to May is the peak of sales, the current off-season is not yet approaching, and it is expected that it will be affected until the next day. Due to the hot weather from July to August, there are more tire problems.
About futures: At present, tire companies are less involved and traders are more involved. The factory had previously focused more on futures, and now the spot is less affected by futures, and the degree of attention has declined.
B company
Overview: The annual production capacity of all steel tires and semi-steel tires is about 3 million, mainly domestic sales, accounting for about 90%. The company is positioned in the high-quality tire market with high quality raw materials and high prices. The export market is mainly in Southeast Asia.
Difficulties of domestic enterprises: The pressure on the overall performance this year is relatively large. On the one hand, foreign countries impose export restrictions on China. In addition, there is excess domestic production capacity, and the quality of products is poor. The gap between profits and foreign countries is very large.
Operating rate: The overall market performance this year was average, and the operating rate was not as good as last year. Some companies performed steadily, while some companies performed poorly.
Inventory: Prior to the summit, the impact was short and raw material stocks were normal. At present, the raw material stocks are about 10 days, sometimes reaching 15 days. With the high stocks of natural rubber this year, it is expected that prices will not rise significantly, and prices will be relatively flat. Finished inventory is also currently low, around 15 days.
Expected market outlook: The company’s tires are of relatively high quality. This year’s order signing is better. Agents get better goods. Generally, they are not busy seasons. They are usually signed in long-term contracts and are relatively stable.
Regarding futures: There is no participation in rubber futures. When the price is low, it will be relatively more raw materials. When the price is high, it will consume some inventory. It will not bet that the price will rise or fall. Using futures to hedge can avoid some risks. However, improper operation can easily lead to futures spot prices. Loss. At present, the factory does not consider using futures hedges, but there are concerns about futures.
C company
Overview: About 8,000 Nissan steel products, accounting for more than 60% of domestic sales, exports are mainly for the Middle East, Africa and Southeast Asia. Semi-steel produces about 30,000 Nissan and exports more than 60%. Most of the raw materials for export use Thai standard, while domestic sales are mainly Thai blend.
Replacement of Seasonal: Replacement fetal frequency is mainly related to pattern, general replacement period is 3-6 months, and vacuum long distance transport tire replacement cycle is more than one year. The seasonality of semi-steel is not obvious, and there is little change in the whole year. The general replacement cycle is 3-4 years.
Operating rate: Currently starting to near full production. The operating rate is generally less affected by the seasonality. Before the advent of summer and the off-season before the Spring Festival, it is generally prepared for the late peak season. Generally, the start of construction will be reduced at the end of equipment maintenance.
Inventory: The procurement of raw materials is currently stable, about 10 days or so, affected by the price fluctuations. The finished product is not less than 20 days, the off season is about one month, and the off-season inventory is relatively high.
The market outlook is expected: the recent domestic steel off-season, hot days in the peak season, high consumption, starting in May low, sales pressure is greater, June-July off-season, July began to rise, 8-10 temperature, tire wear, Replace the peak. In the winter, the weather in the north is cold, in the off-season, the peak of the Spring Festival.
D company
Overview: Semi-steel has a daily production capacity of 30,000 to 30,000, and all steel has a daily production capacity of 10,000 or so. The main raw materials are Thai standard, Ma standard, Thai blend, Ma mixed, Indonesia standard rubber.
Operation: The overall sales this year is worse than that of the previous year. The domestic sales situation is not good. The freight rate during sales rises, and the supply is reduced. The domestic economy is not good and the export is good.
Operating rate: The general market situation this year is generally about starting at about 90%.
Inventory: The inventory of raw materials currently is about 15 days, to prevent problems in the middle supply, generally not shorter than 10 days. Due to the heavy bearish sentiment, raw materials are generally used with the purchase, and fewer contracts are signed.
E company
Overview: Only the production of all steel tires, the daily production capacity of about 4000. Raw materials are only blended in Thai, and new glue is generally used.
Inventory and start-up: raw material procurement is currently not used for about a month or so. Due to poor sales in April and May, the finished product inventory is large at present, but it will not affect the start of production. The daily output is fixed. The order is about one month, and there is no long-term order.
to sum up
Through the investigation, the author believes that China’s domestic tire market performed poorly this year and exports slightly better. As Dongying tire companies are mainly for the domestic market, the overall sales situation is less than the same period of last year. Looking at the operating rate, some companies can still start tires, but some companies perform poorly, so the overall operating rate is less than last year. From June to July, the end market will face greater pressure for the domestic off-season market to be off-season. However, in general, companies will stock more finished products in the off-season, and the rate of decline in tire operating rates is expected to be smaller. In terms of raw material procurement, due to the bearish view on the prices of raw materials in the future market, the general company’s stock of raw materials is in 10-15 days, and it is difficult to make substantial stocks.
At present, rubber stocks have rebounded, and with the advent of foreign rubber-producing peak seasons, supply is expected to increase, and the end of the off-season is approaching, the consumption rate of raw materials will be difficult to increase. In addition, the continued appearance of hedging guarantees will also increase spot liquidity pressures. In the next two months, it is expected that the price of rubber will continue to slump or decline slightly. In addition to the recent resumption of the trade war between China and the United States, the United States has tire-tired products in China’s tariff-raising products, which may deepen the concerns of tire companies in the US market.
For investors, from June to July in the operation of Hujiao, it still remained short. However, due to the current low absolute prices, the stock breaks may inspire downstream stocking sentiment, and in addition, it is difficult to see sharp increases in the downstream. It is necessary to pay attention to the impact of weather conditions at home and abroad.
Translated by Google Translator from http://www.cria.org.cn/newsdetail/44159.html
