On May 27, the rubber sector fluctuated sharply upward in early trading, and bullish sentiment recovered significantly.
The main RU 2609 contract opened flat and moved higher, reaching a maximum of 17,775 yuan/ton, and the heavy volume exceeded the 17,500 yuan/ton mark; the main No. 20 rubber rose sharply by 2.70%, synthetic rubber followed suit, and the sector resonated and strengthened.
The strong surge in the market reflects that the current upstream tire manufacturing industry is fully trapped in the “three highs” dilemma of “high prices, high volatility, and high uncertainty”.
Under the heavy pressure of costs, domestic and foreign tire companies have made intensive noises, and the price increase in June is imminent.
The supply and demand are out of balance, and the price of natural rubber has reached a two-year high.
Today’s onslaught is a concentrated outburst of the spot market’s continued tight balance.
Since the beginning of this year, the price of natural rubber has continued to rise. The current spot price is in the range of 17,500-17,900 yuan/ton, up about 14% from the beginning of the year. Futures prices have also increased by 11%, both at the highest level in the past two years.
In Baisha, Hainan, the purchase price of dry glue reached a high of about 17 yuan/kg, and processing companies rushed to buy it.
However, although high prices have stimulated enthusiasm for tapping, it cannot change the underlying logic of global structural shortages.
According to the forecast of the Natural Rubber Producing Countries Association, global demand will reach 15.602 million tons in 2026, and output is expected to be only 15.324 million tons, leaving an obvious gap.
In Thailand, the main production area, the production is weak due to the replanting of rubber plantations and the aging of rubber trees. The high temperature and drought caused by the El Niño phenomenon have also intensified the production reduction expectations of insufficient production release from May to June.
Domestic production in Yunnan and Hainan was slow in the early stages of harvesting, and the low-yield supply period was extended.
On the demand side, the operating rate of domestic tire companies has steadily recovered. The production and sales of new energy vehicles in April increased by 5.5% and 9.7% year-on-year respectively. Exports of complete vehicles surged by 74.4%. Downstream rigid demand has been steadily underpinned.
Under the mismatch between supply and demand, domestic inventories continue to be reduced.
In the week of May 22, the inventory in the Qingdao Free Trade Zone decreased by 5,900 tons from the previous month to 133,600 tons, and the general trade inventory decreased by 2,500 tons from the previous month. The tight spot circulation provided strong support for the market.
The pattern has been overturned, and synthetic rubber has staged a historic comeback.
The surge in natural rubber is just the tip of the iceberg. The changes in synthetic rubber have put even more pressure on tire companies.
In March this year, the main contract of domestic synthetic rubber futures hit the daily limit strongly, with a single-day increase of 11.99%, and the cumulative increase during the year exceeded 53%.
What is more noteworthy is that the price of synthetic rubber exceeded that of natural rubber for the first time at that time. The price difference between the two once exceeded 1,300 yuan/ton, completely overturning the industry’s long-term perception that “natural rubber is more expensive than synthetic rubber.”
Although recently affected by the easing of the situation in the Middle East, the price of synthetic rubber has dropped to the 14,000 yuan level. However, driven by the rebound of international crude oil by more than 3% and the return of funds to the energy sector, the price of synthetic rubber has recently risen again, indirectly supporting the strength of natural rubber, and the volatility of raw materials remains high.
Costs are pushing back, and the price increase in June is pushing the market back again.
Faced with the surge in upstream raw materials, the profits of tire companies have been severely pressured, and price increases have become the only way out.
International brands took the lead in planning for June: Hankook, Dunlop, and Kumho successively announced that they would raise product prices by 2% to 6% starting from June 1; Michelin, Bridgestone, Goodyear, etc. also completed a new round of price adjustments in May.
Domestic brands are not to be outdone, ushering in the second or even third wave of price increases this year.
More than 40 tire companies issued price adjustment letters in May, adopting a “small steps and fast running” strategy and high-frequency fine-tuning to hedge against sharp fluctuations in costs.
However, although the price increase trend in June has been established, the pace of implementation will be significantly different.
Against the background of overall overcapacity, the distorted situation of coexistence of “price increase letters” and “promotional policies” may continue.
Leading companies rely on their ability to pass on costs to take advantage of the situation to upgrade, while some small and medium-sized brands may be forced to postpone price adjustments or disguised promotions in order to maintain market share.
This storm caused by the “three highs” is accelerating the reshaping of the competitive landscape of the tire industry.
