"Since this year, the price-to-earth relationship between natural rubber and synthetic rubber has reversed once again, making natural rubber prices continue to fall, but the fluctuation of domestic tire prices is no longer a cost driver." At the 16th National Rubber Industry Information Conference held recently, Shen Jinrong, Chairman of Chinachem Rubber Group Co., Ltd., stated this. Market demand remains low It is understood that at present, the total annual consumption of natural rubber in China accounts for 1/3 of the world, of which 70% is used for tire production, and 60% of it is used for all-steel tires. However, due to the poor overall market demand, the operating rate of the tire industry is currently only 60%-70%, and some are even lower. "Originally, market demand was weak, and the United States' "double reaction" was not finished." A few days ago, at a meeting, market personnel of tire companies complained to the media. According to customs data, as of August, the total number of tires under China's two US tariff lines dropped from 45 million kilograms to 19 million kilograms. Industry insiders expect that the decline will be even greater in the later period. In addition, in the US anti-dumping review of Chinese OTR (engineering tires) tires, the tax rates of some companies have risen by more than five times, and the opportunities for exporting to the US market have been almost cut off. 40% of the tire's raw material costs come from natural rubber. Shen Jinrong believes that domestic tire companies cannot expect excessive price declines in rubber prices. Because once the price of natural rubber is much lower than the cost, rubber production companies will carry out industrial transfer. Supply and demand reversal drag rubber prices Data show that in 2014, the apparent supply of natural rubber in China exceeded 5 million tons for the first time, exceeding 45% of the global total supply. At this time, natural rubber prices have already shown a very good turnaround. It is understood that the 400,000-700,000 tons of natural rubber consumed in China has changed the imbalance in supply and demand over the years, and the supply-demand relationship has become more balanced. In the words of Shen Jinrong, “At that time, the price-to-price relationship between natural rubber and synthetic rubber had changed, and the price trend should have stabilized.†However, the development of things was not as good as it was. At the end of last year, the state issued a new standard for compounding rubber. Under the effect of this standard, the tire manufacturers’ expectations for price increase of natural rubber is very high. At the same time, the price of synthetic rubber continued to drop in the context of the sharp drop in international oil prices. Affected by these two factors, since the first half of this year, the price-to-earth relationship between natural rubber and synthetic rubber has reversed again, making the price of natural rubber lower again. Tire prices are no longer a cost driver It is understood that in the first half of this year, almost all prices of raw materials for rubber chemicals were relatively stable, and the production capacity was increasingly concentrated in several large companies; the price of the skeleton materials represented by steel cords had also dropped to the bottom. Shen Jinrong analyzed that carbon black is the only raw material with fluctuating prices, but its upward and downward volatility is almost the same. Because the main raw material for carbon black is coal tar, and now the steel industry has shrunk dramatically, coal tar production is also declining. In addition, the cost of labor, depreciation, etc. in the tire production process does not have any downside, and even some are rising. There is little room for overall price decline. Low tire prices have become the mainstream trend. Currently, northern China has entered the winter and tires have begun to enter the low season. After a period of unravelling supply and demand, the market is basically in a relatively stable state. The period of the company's highest inventory has passed, and the inflection point of inventory growth has appeared. According to statistics from China National Rubber Industry Association Tire Branch, from January to September, the profits of domestic tire companies decreased by 34.82% year-on-year, inventory was 16.093 billion yuan, a year-on-year decrease of 2.65% and a decrease of 10.65% from the previous quarter. "For a period of time in the future, the fluctuation of tire prices will no longer be driven by cost." Shen Jinrong affirmed. 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