In the past six months, the price of natural rubber that has continued to rise rapidly has made China's tire industry usher in a more difficult year. Industry analysts pointed out that the current domestic tire companies are actually facing a double test, one is the rapid rise in raw material prices, and the second is to continue to lose US market share. Two factors will make tire companies face a more complex environment in 2011.
Double Test Extrusion of Domestic Tire Enterprises
Zheng Yongxiang, vice chairman of Shandong Rubber Industry Association, said: â€œFrom the current trend, natural rubber prices will continue to rise in 2011, and the industry is expected to have at least 10,000 yuan gains. This is for most tire manufacturers. A very serious situation."
According to Zheng Yongxiang, tire manufacturing companies in some provinces, including Shandong province, have suffered large losses. â€œSome companies have fallen into a difficult position to maintain their business because of high costs. The frequent rise in rubber prices has also led some companies to not accept orders.â€
In September 2009, the U.S. government decided to impose special ad valorem tariffs of 35%, 30%, and 25% on Chinese tires imported into the United States within the next three years.
On December 13, 2010, the WTO Panel on Dispute Adjudication did not rule that the United Statesâ€™ special safeguard measures against Chinese tire exports to the United States violated WTO rules.
In this regard, Zheng Yongxiang believes that the implementation of special tariffs on tire special security cases has been more than a year, the substantial impact on the domestic tire companies has been formed, China's tire companies exported to the United States blocked, lost nearly 40% of the overseas market.
Excessive production capacity of tires leads to intense competition
The worries around the tire companies are not only the loss of the market brought about by the US tire special protection case, but also the increase in the cost of natural rubber. In recent years, the rapid expansion of production capacity in the domestic tire industry has caused more and more companies to fall into fierce competition.
At present, Shandong has more than 4,000 rubber processing companies and rubber consumption is more than half of the country. Among them, there are more than 500 motor vehicle tire production enterprises that consume the largest amount of natural rubber, and the output has been ranked first in China since 1985, accounting for nearly 50% of the total national production.
Since the beginning of the rise of natural rubber in 2009, Shandong Province has added many tire manufacturing companies, resulting in an excessive number of tire projects. Some of the original production of other rubber products, or even rubber-derived chemical products, also turned to the production of tires. In addition, some companies outside the natural rubber industry are also entering the field of tire production.
Zheng Yongxiang said that the tire production in Shandong Province has maintained a 30% growth rate, which has far exceeded the growth rate of market demand. As the overall profitability of the tire industry declined, overseas markets were further narrowed by restrictions on import trade barriers, which led to fiercer competition in the domestic market.
This increasingly fierce competition has not caused tire companies enough attention. A person in charge of a tire company in Guangrao County, Shandong Province, told reporters: â€œNow it can't be said which company had a bigger project to make other companies fall into fierce competition. The truth is that whoever has enough financial strength and technology will be able to grab more Market."
Relieving raw material demand is imminent
Since 2010, the provinces of major producing regions such as Yunnan have experienced dry weather, and tapping periods in major producing areas such as Thailand and India have been delayed due to rainy weather, resulting in a decrease in natural rubber production compared with previous years, and the price of natural rubber has risen rapidly.
Xing Zheng, natural rubber analyst at Luneng Jinsui Futures, said that due to the reduction in natural rubber production and prices, some domestic traders felt that they had the opportunity to begin their influx into the natural rubber market, including hot money in Jiangsu and Zhejiang. "It is expected that the demand for natural rubber will continue to grow this year. A large amount of funds will flow into the natural rubber futures market, driving up prices and driving up the spot market price."
Some experts and people in the industry believe that the domestic rubber production is not high. In order to protect the domestic natural rubber planting base, China has raised the import tariff by 20% after joining the WTO, which has formed an unfair competition between tire processing in China and foreign counterparts. The industry proposes to gradually reduce the import tariff of natural rubber and protect the interests of domestic tire manufacturers. At the same time, relevant incentive policies were issued to expand the output of synthetic rubber.
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