The global and domestic rubber markets have experienced a significant upward trend in prices since the second half of last year, influenced by multiple factors. Domestically, natural rubber prices rose from 12,000 yuan per ton at the start of last year to 22,000 yuan per ton in February this year—an increase of 44% compared to the same period last year. This surge marked a ten-year high. The continuous rise in rubber prices has had a direct impact on downstream tire manufacturers. According to an official from the Tire Branch of the China Rubber Industry Association, the sharp increase in rubber prices is historically rare and shows signs of continuing. Three main factors contribute to this price surge. First, major rubber-producing countries in Southeast Asia—Thailand, Indonesia, and Malaysia—have implemented joint export control measures, reducing supply through quotas or export restrictions. Second, following China's accession to the WTO, the import tariff on rubber was temporarily raised from 12% to 12%, which significantly increased the cost of imported rubber. Third, the rapid growth of China’s automotive industry has led to increased investments from foreign tire and rubber companies, as well as domestic expansion, driving up demand for rubber. Currently, domestic production stands at around 550,000 tons, while imports reached 1.4 million tons last year, with total demand exceeding 2 million tons. This large demand gap has pushed up domestic rubber futures prices. The rising cost of raw materials has also put pressure on tire manufacturers. From the end of 2002 to February this year, natural rubber prices surged by 318.18%. In tire manufacturing, rubber accounts for about 30% of production costs. With such a steep increase, many companies are struggling to absorb the added expenses. For example, Tai Qiang (Jiangxi) Tire Co., Ltd. estimates that producing a 9 kg tire requires 4 kg of pure rubber. At current prices, this increases the cost by 12 to 15 yuan per tire. With monthly production of 100,000 units, the additional cost exceeds 100 million yuan each month. Qingdao Huanghai Tyre Co., Ltd.'s 2005 annual report showed that while revenue grew by 16%, operating costs jumped by 28%, far outpacing income growth. Similarly, Double Happiness Tyre Industry Co., Ltd., a major player in the tire market, faced severe challenges due to soaring natural rubber prices. To mitigate the impact, the company formed over a dozen cost-reduction teams and focused on developing high-end, specialized tires. Despite these efforts, the ongoing price hikes make it increasingly difficult to sustain operations. Faced with rising costs, tire manufacturers have been forced to raise their ex-factory prices. According to industry sources, nearly all tire companies have increased their prices. Michelin, for instance, raised its prices by 5% to 10% compared to the same period last year. A 215/45R17 tire, which cost 1,520 yuan last year, now sells for 1,700 yuan. Retail prices can be even higher, adding 100 to 300 yuan per unit. Other brands like Goodyear, Bridgestone, and Hankook have also seen price increases, with Goodyear up by 30%, Bridgestone by 3% to 5%, and Hankook by around 5%. However, despite these adjustments, tire companies still face limitations in passing on the full cost increase to consumers, especially given the strong position of the downstream automotive industry. Industry insiders suggest that if one company raises prices, it risks losing business to competitors. As a result, profit margins shrink, and smaller tire manufacturers are particularly vulnerable, facing potential closures. The situation highlights the fragile balance between rising input costs and limited pricing power in the tire sector.

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