For the Chinese tire industry, which relies on exports for half, the United States' "double opposition" stick has brought great influence.
U.S. "Double Counter" Big Stick Has a Great Impact on Chinese Tire Exports
On October 14, 2015, during the 2nd China (Qingdao) Rubber Industry Expo, industry authorities spoke bluntly, after 10 years of rapid development, China's tire industry is plunged into an unprecedented trough.
According to data from the China Rubber Industry Association, in the first seven months of this year, the profits of tire companies in statistical calibers dropped by 35.91% year-on-year, and the figures for August were even more bleak. In the eyes of the authoritative sources in the above industries, the reasons include both the vicious competition caused by excess production capacity and the “double reverse†effect of the United States.
Zhang Wei, chairman and president of Qingdao Rubber Valley Group, said that “double reverse†has caused Chinese tire companies to basically abandon the US market, but China’s output is huge. Under the economic downturn, the entire rubber industry is even worse.
Tire exports encounter 10 years of "freezing point"
"Which company is better than last year, raise your hand to indicate." Prior to the speech, Xu Wenying, vice president and secretary-general of the China Rubber Industry Association, interacted with more than 400 representatives of the company to break the silence on the court. "Too bad, very bad." According to Xu Wenying, this year's situation is even worse than in 2008. It may be the worst year in nearly 10 years. The most immediate cause of the bad is the export frustration.
According to statistics from the China Rubber Industry Association, China’s tire exports fell by 1.5% in the first seven months of this year compared with the average growth of over 10% in the previous decade.
A tire sales person in charge said that the US’s decision to “double reverse†Chinese tires may be a devastating blow to domestic tire companies that rely on exports to resolve overcapacity.
According to the final ruling of the U.S. Department of Commerce in June this year, Chinese manufacturers will be subject to anti-dumping duties of 14.35% to 87.99% and anti-subsidy duties of 20.73% to 100.77%. After the two tariffs are superimposed, some companies enter the U.S. market and must pay a tariff that is more than one times the price of the product. According to data provided by the China Rubber Industry Association, Shandong Yongsheng Group's "double reverse" tax rate is as high as 192.79%.
Mr. Liu Xinze, a partner of Kangda Law Firm who has participated in “anti-dumping†cases for many times, said that the export share of domestic tire production remained basically at 45%-50%. In many overseas markets, the United States accounts for about one-third of the overseas market.
As the United States made a final decision on the “double reverse†of Chinese tires, China’s tire production and exports declined more significantly in August, dropping by 13.8% and 13.5% respectively year-on-year.
Xu Wenying said that after experiencing rapid development in the past 10 years, the domestic tire industry has fallen to an unprecedented low level under the double attack of export frustration and overcapacity.
Overcapacity is difficult to solve in the short term
“What can we do if we can't sell the US? We've taken the EU market and now they don't have a 'double reaction'.†However, Xu Wenying also has concerns that a large number of tires in the country are rushing to Europe and a price war may erupt. The result of the price war is that no one can earn money, and it may lead to a "double reverse" investigation.
A tire company sales executive revealed that the price war has become increasingly fierce and has a direct bearing on the decline in the price of rubber, the main raw material for tires.
In the production of tires, raw material costs account for about 80%, of which rubber accounts for about 50%-60%. Specifically, natural rubber accounts for 40%-50% of tire costs, and synthetic rubber accounts for about 10%.
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