"At the beginning of the year, the cost of transporting a 40 foot container from Shanghai port to Los Angeles port rose from US $4000 to US $7000 now," a broker said in an interview.
In addition to facing the problems of rising sea freight and "difficult to find one container" in the world, tire enterprises mainly use natural rubber, carbon black and cord fabric, which have been rising all the way since the outbreak of the epidemic, which is compressing the profit space of tire enterprises.
Under the interweaving of multiple factors, in order to keep the few remaining profits, tire manufacturers represented by Michelin, Goodyear, Linglong tire and triangle tire have started multiple rounds of price increases this year.
However, compared with a few leading tire enterprises, although most domestic small and medium-sized tire enterprises are also facing the pressure of raw material cost and soaring freight, they dare not say "rise" lightly.
The person in charge of a dealer representing several tire brands at home and abroad in Beijing told reporters that compared with domestic first-line tire brands such as Linglong and Chaoyang, as well as some joint venture brands, domestic third-line tire brands lack the right to speak on price increases due to lack of competitiveness, "Although the price will rise, the increase is relatively conservative. If the price rises according to the normal 'price rise logic', it will be more difficult to sell. Now it mainly depends on the price."
Open the fourth round of price increase in the year
"According to the current trend of some raw materials and the company's production costs, in order to provide better products and efficient distribution services to dealers and stores, the price of all steel and semi steel has been increased by 3% ~ 5% since October 1, 2021." the reporter saw the price increase notice in the internal document of Linglong tire, a leading enterprise in the domestic tire industry.
In response to investors' questions, the Secretary of Linglong tire said, "in the first half of this year, due to the rise in the price of raw materials, the company has raised the price for many times. However, due to the shortage of chips and the rise in the price of steel and other materials used in cars, the price of the company's supporting end can not be fully transmitted."
Linglong tire price increase is only a microcosm of the global tire industry. According to incomplete statistics, up to now, more than 80 tire enterprises around the world have announced price increases. Among them, tire manufacturers such as Michelin, Bridgestone, Pirelli, Zhongce Rubber, racing wheel tire and Qingdao Shuangxing have started several rounds of price increases during the year.
On August 26, Qingdao Shuangxing also issued a notice letter to dealers, saying, "due to the rise in the price of raw materials and the listing of tire manufacturing costs, the company's production and operation have been under great pressure. In order to maintain the sustainable and stable development of business, it is expected to increase the price of passenger car tires by 2% ~ 4% on September 1."
In the same period, Fengshen issued a price increase notice: since September 10, the price of TBR (radial tire) products has been adjusted, and the increase of some specification products ranges from 1% to 6%, involving all Fengshen brands.
For foreign brands, Goodyear announced its fourth price increase in the year in early September. Goodyear chairman rich Kramer announced to investors at the earnings conference call: "the price of products, including passenger car and light truck tires of Goodyear and Cooper tires, will be increased by 8% from September 1."
Before Goodyear, Michelin North America, the world's largest tire enterprise, also announced that the prices of Michelin, BF Goodrich and Uniroyal passenger car and light truck tires in some after-sales markets in the United States and Canada will rise by 8% from September 1. From the beginning of September, the prices of road and off-road commercial vehicle tires will rise by 14%.
Cost increases that cannot be caught up
"Have to rise." many domestic tire manufacturers pour bitter water in the 2021 semi annual report.
The reporter learned that the main raw materials of tires are natural rubber, carbon black and cord fabric. These three materials have entered the rising channel since the third quarter of last year. So far, the price has doubled several times. "The highest price of natural rubber in the first quarter was 1812 US dollars / ton. Although there was a correction by the end of June, the price is still about 1700 US dollars / ton." Linglong tire pointed out in the semi annual report.
A brokerage analyst told reporters, "at the beginning of the year, the cost of transporting a 40 foot container from Shanghai port to Los Angeles port rose from US $4000 to US $7000 now." it is reported that the cost of this route was about US $1500 before the outbreak of the epidemic.
The reporter learned from the interview that the interweaving of multiple factors led to the "difficulty in finding one container". In the first half of 2021, the most direct reason was the strong global cargo trade and strong demand for centralized transportation.
"Freight doubled this year, as did raw materials. There were orders, but there was a lack of containers (containers)," a dealer at Guangrao tire production base in Dongying, Shandong told reporters.
The freight rates of routes from Asia to Europe have doubled several times. Martin Dixon, an expert of an international well-known shipping consulting company, said, "the freight rates of trade from Asia to Europe have increased nearly seven times."
According to the statistics of seaexplorer, a container transportation platform, as of August 11, more than 120 ports around the world were in congestion, and more than 392 ships were waiting to berth in ports all over the world. Therefore, the "port congestion surcharge" was developed, which was superimposed on the rise of raw material prices and sea freight, and the rise of tire prices became an inevitable trend.
Cut off part of the market to survive
In order to keep profits, tire enterprises have to frequently announce price increases. However, compared with first-line brands such as Ma brand, Michelin and Bridgestone, in the face of rising raw materials and sea freight, many third-line brand tire manufacturers are more conservative in price increases due to weak market competitiveness.
"For example, there are some third tier brand tire manufacturers in Guangrao, Dongying, Shandong, whose products are mainly exported, such as exported to the United States, facing 'double anti' (anti-dumping and countervailing investigations) , the increase of shipping costs and the low efficiency of container turnover make it difficult for these manufacturers to survive. Although prices will rise, the increase is relatively conservative. If prices rise according to the normal "price rise logic", sales will be more difficult. Now it mainly depends on prices to win. "The person in charge of the above-mentioned dealers told reporters.
The reporter learned that in order to stabilize overseas customers and increase export volume, some tire enterprises have to give a certain maritime freight subsidy. The foreign trade manager of a tire company revealed that "a cabinet (container) subsidy of 500 ~ 1000 dollars."
The above dealers of Dongying Guangrao tire production and manufacturing base told reporters that the original tire products were exported to Europe, Africa and North and South America. Now they cut off the American market and "basically don't go".
With the reduction of business in overseas markets, the operating rate of tire enterprises has also declined recently.
Shandong is a major tire export province, with tires exported to North and South America, Europe, the Middle East and other places. Public data show that as of September 9, the operating load of all steel tires of tire enterprises in Shandong was 41.2%, down 8.81 percentage points from the previous week and 33.32 percentage points from the same period last year; the operating load of semi steel tires of domestic tire enterprises was 39.48%, down 15.04 percentage points from the previous week and 15.04 percentage points from last year It fell 30.81 percentage points over the same period.
The dealer told reporters that although Guangrao tire enterprises have sufficient inventory, they have to continue to start, "if they don't start, they will lose money, and if they start less, they can't do it."
The report released by Zhuo Chuang information, a research organization, shows that more than half of the third quarter has passed, and the domestic all steel tire market has passed through passively under the weakness and pressure. During this period, production suspension and production reduction occur intermittently, which makes the actual production and sales level in the third quarter not ideal. In addition to poor export sales, due to the aggravation of the crisis of "chip shortage", the production of domestic automobile enterprises is blocked, and the demand for domestic tire accessories also decreases.