Since the second half of last year, rubber prices in both international and domestic markets have been on a steady upward trend. Domestic natural rubber, which started at 12,000 yuan per ton at the beginning of the year, climbed to 22,000 yuan per ton by February this year—a 44% increase compared to the same period last year. This marked a 10-year high for the commodity. The rising cost of rubber has significantly impacted downstream tire manufacturers. There are three main reasons behind the sharp price surge. First, major rubber-producing countries in Southeast Asia—Thailand, Indonesia, and Malaysia—have entered into joint insurance agreements, reducing their export volumes or implementing export quotas, thereby limiting supply. Second, after China joined the WTO, the import tariff on rubber was temporarily raised from 12% to 12%, which dramatically increased the cost of imported rubber. Third, the rapid growth of China’s automotive industry has led to increased investment from foreign tire and rubber companies, as well as expanded production capacity from domestic firms, driving up demand for natural rubber. Currently, domestic rubber production stands at around 550,000 tons, while imports reached 1.4 million tons last year. With total demand exceeding 2 million tons, the significant gap between supply and demand has pushed up futures prices. The rise in raw material costs has also placed a heavy burden on tire manufacturers. From the end of 2002 to the end of February this year, rubber prices surged by 318.18% over three years. Synthetic rubber prices have remained high as well. In tire manufacturing, rubber accounts for about 30% of production costs, and the sharp increase in rubber prices has inevitably led to higher expenses. Over the past three years, material costs have risen by more than 10%, pushing many tire companies to their limits. At Tai Qiang (Jiangxi) Tire Co., Ltd., Huang Qiang, head of the materials technology department, explained that a 9 kg tire requires 4 kg of pure rubber. At current prices, just using plastic instead of rubber adds 12 to 15 yuan per tire. With monthly production of 100,000 tires, this translates to an additional cost of over 100 million yuan each month. According to Qingdao Huanghai Tyre Co., Ltd.'s 2005 annual report, main business income rose by 16%, but operating costs jumped by 28%, far outpacing revenue growth. Similarly, Double Happiness Tyre Industry Co., Ltd., one of the largest tire manufacturers globally, has seen its production heavily affected by the soaring cost of natural rubber. To cope, the company has formed multiple cost-reduction teams and focused on developing high-end, specialized tires. However, with rubber prices continuing to climb, maintaining production has become increasingly difficult. Facing rising costs, tire companies have no choice but to raise prices. According to industry insiders, nearly all tire manufacturers have increased their ex-factory prices. A Michelin tire retailer reported that prices have risen by 5% to 10% compared to the same period last year. For example, a Michelin 215/45R17 tire went from 1,520 yuan to 1,700 yuan, while a 245/50R18 model now costs 3,000 yuan, up from 2,750 yuan. Retail prices are even higher, ranging from 100 to 300 yuan per tire. Another retailer selling Bridgestone, Goodyear, and Hankook tires noted that Goodyear prices rose by 30%, Bridgestone by 3% to 5%, and Hankook by about 5%. While price increases help offset some of the rising costs, the impact on the automotive industry is limited. As one anonymous industry insider pointed out, car manufacturers often source tires from multiple suppliers, and those who raise prices first risk being replaced. This puts pressure on profit margins, especially for smaller tire companies, which could face closure if the situation continues.

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