Tire Industry Faces Dual Crisis
The persistently high price of natural rubber has already been suffocating tire companies, and the sudden surge in international crude oil prices has only exacerbated the industry's already dire situation. Since the beginning of 2026, the tire industry has faced unprecedented cost pressures.
Data from the Shanghai Futures Exchange shows that natural rubber futures prices fluctuated upwards from 16,195 yuan per ton in early January, briefly exceeding 17,500 yuan in late February. Although prices fell back to 16,555 yuan per ton on March 5th, they were still up 2.2% from the beginning of the year, and the persistently high prices have continuously increased the cost burden on companies.
Just as the entire industry was struggling to cope with the impact of rising natural rubber prices, the US-Iran military conflict that erupted on February 28th quickly ignited a surge in international crude oil prices, further intensifying the operational pressure on tire companies.
The impact of rising crude oil prices on the tire industry goes far beyond simply "more expensive gas." As a resource-intensive industry, crude oil plays a crucial role in the raw material system of tire manufacturing. Synthetic rubber, carbon black, additives, and chemical fibers are all core raw materials for tire production, and synthetic rubber prices are highly correlated with crude oil prices. Carbon black production also relies on derivatives such as petroleum coke. These raw materials alone account for over 40% of tire production costs.
Following the escalation of the conflict, the safety of shipping in the Strait of Hormuz, controlled by Iran, is directly threatened. Disturbances in this crucial waterway, which accounts for approximately 30% of global seaborne oil trade, quickly transmit to crude oil prices.
As of March 4th, Brent crude oil futures prices had risen by over 10%, briefly exceeding $82 per barrel, a one-year high, and driving up the prices of petrochemical raw materials such as synthetic rubber and butadiene.
The soaring oil prices have led to a corresponding increase in petroleum-based raw material prices, forcing tire companies to face a double whammy of natural rubber and synthetic materials. Even more challenging is the ongoing impact of these price increases—as a major methanol exporter, Iran's upstream supply chain will face further pressure if the conflict disrupts the supply of key chemical intermediates such as rubber additives. Japan's Innolux Corporation has announced a price increase of over 10% for its latex products starting in April, indicating that the pressure from raw material costs will continue to be passed on to tire companies.
Meanwhile, logistics costs have also risen significantly due to soaring oil prices. Disruptions to shipping in the Strait of Hormuz have forced some vessels to detour, extending voyages by an average of about 15 days. This has not only increased fuel consumption but also driven up ocean freight rates and war risk insurance premiums. Freight rates on some routes have even tripled in a single day, further increasing the transportation burden on companies' exports and raw material imports.
From a cost structure perspective, the skyrocketing prices of rubber, crude oil, and transportation and labor have pushed tire companies to near-critical operating pressures. Currently, raw materials account for about 70% of tire manufacturing, and the simultaneous rise in both natural rubber and petroleum-based raw material costs directly increases unit production costs.
With the combined effects of continuously rising labor costs and persistently increasing logistics expenses, the cost-profit margins of most companies are declining rapidly. Industry analysis shows that if raw material costs rise by more than 10%, tire companies' net profits will suffer a loss of over 5%, a devastating burden for small and medium-sized enterprises (SMEs) already struggling with thin profit margins.
Currently, some SMEs are experiencing tight cash flow, with some forced to reduce production capacity and suspend orders due to their inability to absorb rising costs. While large enterprises possess advantages in scale purchasing and inventory management, their profit margins are also being continuously squeezed.
Without intervention, many SMEs may collapse due to cash flow disruptions, and the profits of leading companies will continue to be eroded. The current cost pressures are being passed down through generations, forcing the tire industry into a price increase cycle.
Some companies have already tentatively adjusted their prices, attempting to alleviate operational pressure and maintain normal operations through moderate price increases. This is not a proactive price hike, but a survival measure forced by multiple cost pressures, and an inevitable choice for the industry to cope with systemic shocks.
For the tire industry, this round of cost crisis is both a severe challenge and an opportunity for structural reshuffling. Small and medium-sized enterprises lacking core competitiveness and with weak risk resistance may accelerate their exit from the market, while leading enterprises with advantages in technology accumulation, cost control and supply chain resilience are expected to drive product structure optimization and industrial upgrading under pressure, leading the industry to a new stage of high-quality development.
