May 27, the rubber sector experienced significant upward volatility in the morning session, with bullish sentiment significantly recovering. The RU Main Contract 2609 opened flat and moved higher, peaking at 17,775 Yuan/ton, breaking through the 17,500 Yuan/ton threshold with volume expansion; No. 20 Rubber main surged 2.70%, synthetic rubber followed the rise, and the sector moved in correlation strengthening. The strong surge on the market reflects that the current tire manufacturing upstream is comprehensively trapped in the "High Price, High Volatility, High Uncertainty" "High Three" dilemma. Under heavy cost pressure, tire companies domestically and internationally spoke intensively, and the June price hike wave is imminent.
Imbalanced Supply and Demand, Natural Rubber Price Hits Two-Year High
The fierce assault on the market today is the concentrated explosion of the spot market continuing to maintain a tight balance. Since the beginning of the year, natural rubber prices have continued to rise, and the current spot price is in the range of 17,500-17,900 Yuan/ton, up approximately 14% from the beginning of the year; futures prices also rose 11%, both at near two-year highs. In Baisha, Hainan, the dry rubber acquisition price reached a high point of around 17 Yuan/kg, and processing enterprises were scrambling to acquire it.
However, while high prices mobilized tapping enthusiasm, it was difficult to change the underlying logic of a global structural shortage. According to the Association of Natural Rubber Producing Countries forecast, global demand will reach 15.602 million tons in 2026, while production is expected to be only 15.324 million tons, with a clear deficit. The main producing area Thailand faces weak production due to tree planting changes and rubber tree aging. The El Niño phenomenon's high temperature and drought also exacerbated production release deficits for May-June. Domestic Yunnan, Hainan initial tapping period production is slow, and the low supply period is extended.
On the demand side, the operating rate of domestic tire companies is steadily recovering. New energy vehicles saw year-on-year growth of 5.5% in production and 9.7% in sales in April. Vehicle exports surged 74.4%, with stable downstream rigid demand supporting the base. Under supply-demand mismatch, domestic inventory continues to draw down. For the week ending May 22, Qingdao Bonded Area inventory decreased 0.59 million tons MoM to 13.36 million tons. General trade inventory decreased 0.25 million tons MoM. Spot circulation tightness provided strong support for the market trend.
Market Structure Disrupted, Synthetic Rubber Enacts Historic Overtaking
Natural rubber's surge is merely the tip of the iceberg. The abnormal movement of synthetic rubber puts more pressure on tire companies. In March this year, the domestic synthetic rubber futures main contract hit a strong limit up intraday, with a daily increase of as high as 11.99%, and a cumulative increase of over 53% for the year.
More worthy of attention is that synthetic rubber prices exceeded natural rubber for the first time at that time. The spread 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 influenced by the easing of Middle East tensions, synthetic rubber prices dropped to the 14,000 Yuan level, but driven by international oil rebounding over 3% and capital returning to the energy and chemical sector, synthetic rubber prices recently rose again, indirectly supporting the rise of natural rubber, with raw material volatility remaining high.
Cost Forcing, June Price Hike Wave Pressures Again
Facing the runaway surge of upstream raw materials, tire company profits are severely compressed, and price hikes become the only way out. International brands took the lead in layout for June: Hankook, Dunlop, Kumho announced price increases of 2%-6% respectively starting from June 1; Michelin, Bridgestone, Goodyear also completed new rounds of price adjustments in May.
Domestic brands also did not want to lag behind, welcoming the second even third wave of price hikes this year. Over 40 tire enterprises released price adjustment letters in May, adopting a "Small Steps Fast Running" strategy to offset violent cost fluctuations with high-frequency micro-adjustments.
However, although the June price hike wave has been established, the implementation rhythm will diverge significantly. Under the background of overall capacity overcapacity, the distorted situation where "Price Hike Letters" and "Promotional Policies" coexist may continue. Leading enterprises leverage cost transfer capabilities to upgrade, while some SME brands to maintain market share may be forced to postpone price adjustments or promote sales in disguised ways. This storm triggered by the "High Three" is accelerating the reshaping of the tire industry's competitive landscape.
Image Source: CCTV Finance
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