The tire market underperformed, dragging down tire producers’ sales, which resulted in high inventory. In July, with the gradual recovery of the market, producers may have better sales, and the inventory at tire producers may turn to fall.

Supply Analysis

From January to June 2022, the overall production of semi-steel tires in China underperformed. With restricted capacity release, the output of semi-steel tires was not high, which decreased from last year. From January to June, the total output of semi-steel tires in China was 20,411.46kt, down 4.98% Y-O-Y. In June, as the market recovered somewhat, producers’ sales improved, and so did their operating rates. The output in June reached 3,792.53kt, up 6.06% M-O-M and 11.63% Y-O-Y.

Demand Analysis

Replacement tire market: In June, the market picked up. It was heating up, and business people traveled more. Besides, affected by frequent rains in the south, the demand for semi-steel tires in some regions improved somewhat. What’s more, with the ensuing summer vacation, people travelled more, so the frequency of tire replacement increased.

Export market: China’s tire export showed good momentum. In May, China exported 209.62kt of semi-steel tires, which increased by 15.21% from last month and 19.34% from last year. The total export volume from January to May was 948.45kt, up 1.27% Y-O-Y. SCI holds that China’s semi-steel tire export continues to improve in June, which supports sales volume greatly.

OE tire market: Since May, the production of passenger cars has improved significantly. In June, the output of passenger cars was 2,239,000, up 31.6% M-O-M and 43.6% Y-O-Y.

Inventory Analysis

After the accumulation in March and April, the inventory of semi-steel tires reached a high level. In May and June, the inventory fluctuated within a narrow range. As of June, the inventory of semi-steel tires was 19,455,000, up 0.67% Y-O-Y.

Forecast

Supply: As prices of main feedstock of tires drop, the cost pressure of tire production is relieved somewhat. Besides, with the recovery of the market, the operating rate of tire producers may increase slightly.

Demand: The export market is improving, strongly supporting the sales volume. The performance of passenger car production was passable, and in July, it is expected to be not so tepid in the traditional slack season, which is anticipated to boost the sales of semi-steel OE tires. The replacement tire market is a weak recovery, and it is expected that it will continue to improve in July.

Inventory: Boosted by demand, tire producers’ inventory may be consumed slightly. It is expected that semi-steel tire enterprises’ inventory may decrease.