BEIJING, June 4 /PRNewswire-Asia/ -- Frbiz.com, one of China's leading B2B search platforms, reports that tire industry demand is booming.
According to Frbiz's reports, driven by strong demand, the tire industry is still booming. However, the current industry average PE and PB are 17 times and 4 times normal levels, respectively; from a relative valuation perspective, Frbiz suggests that analysts pay more attention to tire industry raw material prices and demand growth changes.
In 2010, China's total tire production volume will reach about 700 million tons; indicating faster than usual growth. Frbiz is expected that in the next five years, the average annual growth rate of the tire industry will be about 10% - 15%. Analysts believe that with the support of strong demand, tire sales will stay relatively high, leading to fairly certain profits.
Frbiz pointed out that demand in the tire industry stems mainly from two aspects: first, in 2009, the number of motor vehicles reached 186 million, of which 76 million were automobiles, which means that the future maintenance market in the tire industry is huge. Furthermore, China is now an auto superpower; from the growth in demand, it appears that in the next two years a growth rate of 15% - 20% can be maintained. Besides the automotive industry, the machinery industry will also be a market for rubber tires, accounting for about 10% of demand. Frbiz expects that the future of the construction machinery industry is still expected to maintain a three-year 15% compound annual growth rate, which will boost the construction machinery industry's demand for tires.
However, it is worth mentioning that in the context of strong demand, the price of natural rubber will play an important role in determining prices, because it is a key factor in tire enterprises' profit levels. The tire's main raw materials are natural rubber and synthetic rubber, steel cord, cord fabrics and black carbon. Frbiz expected that in the second half of the year, average prices of natural rubber will be lower than the average level of the first half year, which will put pressure on industry costs.
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