The Great Tyre Industry Paradox: When Raw Materials Outearn Finished Goods

Before China’s National Day holiday, a full set of all-steel truck tyres cost just over 900 yuan. Within days of the holiday ending, quotes had jumped 3–5%. Over 60 tyre manufacturers across China did the exact same thing in the space of a month: they raised prices. The untold story? Many are losing 80 yuan on every single tyre they sell.

I. The 20,000 yuan threshold: a level not seen in 9 years

In late September and early October, more than 60 Chinese tyre factories issued formal price increase notices. The reason behind the wave of hikes lies in a starker set of figures upstream.

On 8 October, the front-month natural rubber contract on the Shanghai Futures Exchange (SHFE) closed at 20,145 yuan per tonne — up over 28% year-to-date and at its highest level in nine years. Three days earlier, on 30 September, it surged 5.54% in a single session to close at 20,095 yuan, marking the first close above the symbolic 20,000 yuan mark since March 2017.

Spot prices moved in tandem. Data from commodity analyst BaiChuan Yingfu put the domestic average spot price of natural rubber at around 19,400 yuan per tonne, up 31% year-on-year.

This is not the first rubber price rally — but this one is different. According to GF Futures, the immediate trigger is production disruption fears driven by extreme weather in key growing regions. The deeper cause, however, is that global natural rubber supply has entered a structural tight phase. The same weather events that caused only minor blips five years ago are now capable of roiling the entire market.

II. All three core raw materials surge, pushing costs up 25%

Raw materials account for over 70% of a tyre’s production cost. Natural rubber, synthetic rubber and carbon black alone make up more than 60%. What makes this cycle unprecedented is that all three are rising at the same time.

1. Natural rubber
   Extreme weather in major producing countries has combined with long-term structural constraints. Rubber trees take 6–8 years from planting to first tapping, and the previous low-price cycle suppressed replanting. As a result, the share of ageing trees in main producing regions keeps rising, leaving supply very inelastic. The Association of Natural Rubber Producing Countries (ANRPC) estimates global output at 15.32 million tonnes in 2026 versus consumption of 15.60 million tonnes — a deficit of 280,000 tonnes, wider than in 2025.

2. Synthetic rubber
   On 8 October, synthetic rubber futures closed at 16,590 yuan per tonne, up 4.54% on the day. Business community data shows butadiene rubber at a benchmark 16,220 yuan/tonne (+39% YoY) and styrene-butadiene rubber at 16,175 yuan/tonne (+36% YoY).

3. Carbon black
   The benchmark price stood at 11,692.86 yuan/tonne on 1 October, up 59.74% year-on-year and at a six-year high. Tight coal tar supplies upstream — high-temperature coal tar prices in Shandong rose roughly 45% in September alone — have added 3,000–4,000 yuan per tonne to carbon black costs. The China Rubber Industry Association estimates the carbon black sector as a whole lost over 120 million yuan in September.

The picture is even clearer from Longzhong Information data: as of 29 September, raw material cost indices for both passenger car (PCR) and truck (TBR) tyres were up around 25% year-on-year.

III. The sobering math: selling raw materials is more profitable than selling tyres

The most counterintuitive truth of this cycle lies in a simple calculation.

According to Zhuochuang Information, the production cost of a single all-steel truck tyre reached 989.44 yuan in August, while the market selling price was only 908.66 yuan — a negative processing margin of 80.78 yuan per tyre. In other words, turning raw materials into a finished tyre does not add value — it destroys it.

Some tyre makers put it even more bluntly: the choice is either halt production entirely, or sell stockpiled raw materials to competitors. Selling raw materials delivers a 15% margin; making tyres loses money.

This is no industry myth — it is a classic symptom of severe overcapacity: the processing stage no longer generates positive value. When an industry makes more money selling raw materials than finished goods, its capacity glut has reached the point where manufacturing itself is value-destructive.

The real-world response has been production cuts. As of 30 September, domestic capacity utilisation stood at 48.68% for all-steel TBR tyres (down 6.68 pp YoY) and 52.6% for PCR tyres (down 7.05 pp YoY). In the final week of September alone, utilisation rates dropped 10.44 pp for PCR and 9.79 pp for TBR month-on-month.

IV. Price hikes of just 3–5%: who absorbs the gap?

This creates the most paradoxical dynamic of the cycle: costs are up over 20%, but price increase notices typically announce rises of only 2–5%.

Since September, over 60 tyre enterprises have issued more than 70 price hike announcements covering TBR, PCR and off-highway tyres. Another 20+ issued notices during the National Day holiday, nine of them implementing their second price increase in a short period. Zhongce Rubber, for example, raised TBR prices by 2–5% on 16 September, then announced a further 3–5% increase effective 1 October — two rounds of hikes in one notice.

Why can’t prices rise further? Weak demand cannot absorb steeper increases. All-steel truck tyres have some support from old diesel truck replacement cycles, but passenger car tyres are held back by high social inventories and subdued consumer spending. At the same time, trade barriers in some overseas markets are pushing up export costs.

China’s General Administration of Customs reports that rubber tyre exports reached 6.63 million tonnes in the first eight months of 2026, up 2% year-on-year — a slower pace than the same period in 2025.

Price increase letters are for downstream customers. The real cost math stays in-house. The gap between input costs and output prices has to be absorbed by manufacturers themselves.

Those that cannot absorb it will exit. If raw material prices stay elevated through the fourth quarter, the first to be shaken out will be small and medium-sized tyre makers with neither overseas production capacity nor pricing power.

V. What this means for end users

Three knock-on effects are worth watching:

1. Higher replacement costs 
   Passenger car tyre price rises of 2–5% translate to a few hundred yuan for a full set of four. The impact is far more noticeable for heavy-duty truck operators: all-steel tyres are high-value, high-turnover items, and price hikes feed directly into operating costs — and eventually into logistics rates.

2. An end to fixed-price deals
   Some manufacturers have explicitly stopped accepting prepayment-based price locks, and distributors are also initiating price adjustments. This means stockpiling tyres ahead of hikes no longer pays off — price inflation is moving from a factory decision to a full-chain reality.

3. The time lag 
   Rubber trees take 6–8 years to mature and start producing. A tyre price increase notice takes 10 days from issue to implementation. Supply recovers on a timescale of years; prices react on a timescale of days.

Closing thought

Go back to the truck driver at the start of this article. The extra few tens of yuan he pays for a tyre is the final link in a chain reaction as three raw material markets tighten simultaneously.

Six years for a rubber tree to grow. Ten days for a price hike to take effect. That time mismatch is the real driver of this cycle.

And the question worth asking is this: when selling raw materials becomes more profitable than making tyres, should an industry cut capacity first — or raise prices first?