Rubber price correction tires downstream benefit is not obvious

Relevant department data shows that the price of natural rubber fell by 7.9% in a week and fell by 11.9% in the past one month; synthetic rubber (including butyl rubber, chlorobenzene rubber, etc.) with which it has an alternative relationship has recently dropped by 10%-15% But butadiene, which is more sensitive to the market, plunged 29.5%, making it the “decrease king” of the rubber industry recently.

It is reported that there are two major factors in the sharp drop in the price of rubber raw materials.

First of all, short-term crude oil prices have fallen, making synthetic rubber cost-free. The middlemen and customers expect the follow-up price to decline and advance the price, while the pricing formula for some long-term orders is based on crude oil prices.

Second, the price of natural rubber in the past was affected by non-market factors such as the Indonesian earthquake and the collection and storage of Thai policies. At present, the main producing areas of natural rubber are all in the rubber season and the market is fully supplied. At the same time, downstream demand (mainly automobiles) is affected by the European debt crisis and there is a risk of continued downward movement.

From the point of view of rubber planting growth cycle, the member countries of the Association of Natural Rubber Producing Countries (ANRPC) have entered the peak period of rubber cultivation since 2005. The average annual new planting area in 2006-2008 reached 300,000 hectares, which is 5-6 times that of 2003-2004.

According to the growth period of 7 years, from 2012 to 2015, a large number of newly planted rubber trees will enter the mature period of tapping, which will bring a large amount of new supply. In addition, the implementation of price alliances in major natural rubber producing countries is also limited.

It is reported that the total of synthetic rubber and natural rubber accounts for 40%-50% of the manufacturing costs of downstream manufacturers. The drop in raw material prices will bring down the cost of related downstream manufacturers such as tires.

Industry sources said that the short-term decline in the price of rubber raw materials will bring about a 1-2 quarter increase in gross profit margin for the Chinese tire industry. However, some people think that because the domestic tire industry is highly fragmented, the future cost reduction may be offset by price competition, rather than tire rubber products companies relatively benefit.

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