China’s tyre producers hike prices amid surging material costs

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Many Chinese tyre producers are raising prices due to surging prices of raw materials.

Guizhou Tyre Co. Ltd and Triangle Tyre Co. Ltd recently said in online communications with investors that they have arranged tyre product price hikes due to rising prices of raw materials.

Aeolus Tyre Co. Ltd has announced that it will raise prices of construction equipment tyre products by 4% – 5%, starting from December 1. Sailun Tyres Co. Ltd has raised prices of all TBR (Truck and Bus Radial Tyre) products by 3%, starting from November 16.

Zhongce Rubber Group Co.,Ltd has also announced that it will hike prices of various tyre products by 2% – 3%, starting from different dates between November 16 – December 1.

According to companies’ announcements, more than 80 Chinese tyre producers have said they would hike prices of tyre products in the latest round hikes. Most of them raised prices by 2% – 5%, with some hiking prices by as much as 10%. Several companies including Triangle Tyre and Shandong Linglong Tyre Co.,Ltd have hiked tyre prices more than once this year.

Many companies said that, due to factors including rising raw material prices, restrictions on power consumption and environment protections regulations which combined pushed higher production costs, they are forced to raise prices to ease the pressure.

“Because of volatilities in prices of raw materials such as natural rubber, synthetic rubber and carbon black, our overall material purchase costs surged more than 20% in the third quarter compared to the same period last year,” an executive of a tyre producer in North China.

According to Triangle Tyre’s financial results, prices of natural rubber jumped 24.5% year over year in the third quarter, up 0.8% from the previous quarter, and prices of synthetic rubber surged 66.5% year over year, up 9.3% from the second quarter.

Prices of all-steel cords grew 21.3% year over year in the third quarter, up 0.8% from the second quarter, and prices and carbon black surged 53% year over year, up 0.7% from three month earlier, according to Trangle Tyre.

Shandong Linglong Tyre said that its material purchase costs in the third quarter were 24.77% higher than a year earlier.

Surging material prices, combined with rising shipping costs and other costs, have added pressure on tyre producers’ production and earnings, with many seeing higher revenue but lower profit.

For instance, Sailun Tyres generated a total of 13.2 billion yuan in revenue in the first three quarters of the year, rising by 18.7% from the same period in 2020, but its net profit attributable to parent fell by 14.6% to 1 billion yuan.

Shandong Linglong Tyre’s revenue grew by 8.1% year over year in the first three quarters but its net profit tumbled by 41.9% during the same period to 930 million yuan.

Some industry insiders say that falling automobile sales in China also added pressure. The country’s automobile sales have been sliding since May because of a shortage in automotive chip supply, which reduced sales of tyre products.

According to Salun Tyres’ financial report, it sold 10.84 million units of tyres in the third quarter, falling by 10.7% from a year earlier and down 3.7% from the previous quarter. Shandong Linglong Tyre said its tyre sales reached 15.4 million units, down 11.64% from a year earlier.