Why can looters succeed? Dr. Cao Kechang, senior vice president of Cooper Tire Global and general manager of the Asia-Pacific region, disclosed that “precise use of industry rules, opaque information, and other factors have triggered the industry-wide panic in tires and other industrial Chains. The big looting."
Rubber prices soar and plunged, affecting the tire industry
Supply and demand + time leverage behind soaring
Natural rubber has been consolidating for many years at a low level since its plunge in March 2011. In September 2016, the depressed natural rubber market suddenly “reversedâ€. In just 6 months, the price of natural rubber futures 1705 contract rose from less than 12,235 yuan to 22,310 yuan, or more than 82%. Spot rubber prices also rose steadily.
However, this is not a reversal of the price of natural rubber, but a rare flash, a once-in-a-month skyrocketing consumer demand at the C-side of the tire, and a careful "predation" of the rules of the natural rubber industry chain. . In February 2017, natural rubber prices fell sharply and continued to fall for four consecutive months. As one rose and one fell, the "predator" made a profit.
The first leverage is the gap between supply and demand. "According to the normal law, the gap between supply and demand will reach a certain percentage and the price may fluctuate widely. In the natural rubber market, this proportion may be around 5% to 10%.
The second bar is time. The rubber industry is operating in the whole industry chain, so the entity operators face a big problem - even if raw material prices rise, they must also ensure a certain amount of production and cannot stop production. Because once the production stops, the cost of restarting machines and plants is higher. Once the lack of goods can not meet the C-side consumer demand, it will lead to a series of negative effects such as goodwill.
Therefore, in order to ensure normal production, tire manufacturers with the greatest demand for rubber generally maintain rubber inventory for more than 30 days. Therefore, in theory, a 5% supply gap, corporate inventory is less than 30 days, and rubber stocks in Qingdao Free Trade Zone are less than 20 Ten thousand tons, these two conditions are satisfied at the same time, futures capital has a great chance of success, to rob the real economy.
Predator's plan policy Large leverage under small levers
In the third quarter of 2016, the best opportunity came. Under the above two major levers, three small levers emerged, forming a fragile nerve that uses small levers to leverage large levers and use large levers to shake the entire tire manufacturing industry.
Utilizing the rise in oil prices, it instigates the rise in butadiene. Petroleum-ethylene-butadiene-synthetic rubber, which is a price-conducting Chain Link. Butadiene is an important raw material for synthetic rubber, so the supply of synthetic rubber is tight, which in turn affects natural rubber prices.
Thailand flood. Since December 2016, Thailand, a major rubber-producing country, has experienced two consecutive continuous rainfalls, causing two floods and some bridges breaking. Under the combined effect of the expected reduction in natural rubber production in Thailand and the impact of the final product shipments from natural rubber processing plants, the supply of natural rubber becomes even more intense in the short term.
Certified supplier system. "There are more than a dozen types of natural rubber, each with different suppliers. And for quality and safety reasons, tire manufacturers will only purchase from suppliers they have certified. If these suppliers do not have goods, tire companies Faced with the dilemma of no meter squat," said Cao Kechang. Therefore, even if it is known that rubber will be restored within 30 days, tire manufacturers will also worry that their own certified suppliers will be out of stock and will not be able to buy their own goods. At this time, grabbing the goods became the only acceptable behavior.
Recently, the rubber warehouse in Qingdao Free Trade Zone fell to about 91,900 tons, setting a new low since 2011. Under normal circumstances, the rubber stock in Qingdao Rubber Bonded Area is about 200,000 tons. Once the inventory falls below 150,000 tons, any news of accidents can easily cause panic. If the price falls below 100,000 tons, the price jump will become a high probability event. China's tire companies no longer choose to pay rubber overseas first, and arrive after 30 days. Instead, they directly purchase rubber from suppliers in Qingdao Rubber Bonded Zone.
At the same time, Singapore’s Shell’s Mao Hung-Io base petrochemical product plant was “discontinued due to force majeureâ€, driving the butadiene price to rise by US$200/ton in one week. About 10 large factories actively or passively slowed the volume of synthetic rubber shipments, resulting in the continued rise of synthetic rubber and natural rubber. The price of synthetic rubber rose from the initial 8,000 yuan/ton to 22,000 yuan/ton. Natural rubber futures prices rose even more fierce, from 11,770 yuan in August 2016 to the highest in February this year, 22,350 yuan (calculated on the Shanghai Futures Exchange rubber index).
Tire industry after "disaster"
The fierce rise will no longer be able to break away from the fundamentals and exist for a long time. After flashing, prices abide by economic rules and return to the value center. The price of rubber in February 2017 rose to about RMB 22,310 per ton, and it turned sharply down for four consecutive months. As of May 11, 2017, rubber 1705 contract fell to 13,215 yuan / ton. The futures tycoons have backhanded short and perfect exits, leaving behind a looted rubber industry including the tire industry.
According to incomplete statistics, a number of tire listed companies' profits declined in the first quarter, and some companies even lost money. For example, Fengshen Tire had a loss of 119 million yuan in the first quarter and the racing wheel Jinyu had a loss of 51 million yuan. In the first quarter, Jiatong Tire's net profit dropped by 23.4% year-on-year to 28.0325 million yuan. The data from the China Rubber Industry Association is even less optimistic. In the first two months of 2017, 41 (tire) key member companies realized a profit of 237 million yuan, a year-on-year drop of 59.97%; there were 16 loss-making companies with a loss of 313 million yuan.
Fengshen Tire
The factory will stop production, employees will pay less, and a series of negative effects will follow. For example, tire companies’ profits have fallen further, tire distributors (traditional dealers and e-commerce companies) have been in trouble, employees’ income has declined, and work enthusiasm has declined. In extreme circumstances, some companies may reduce their quality in order to reduce their losses, leading to a vicious circle of declining sales and continued decline in quality, eventually being acquired or bankruptcy.
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