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Auto: Tire makers feel deflated

By Li Fangfang (China Daily)
Updated: 2008-09-01 10:56

 

'Made in China' high value-added TBR (truck bus radial) tire on display at an auto fair in Shanghai. [China Daily]

Chinese tire makers are feeling deflated.

According to the China Rubber Industry Association, in the first half of this year, China's tire industry experienced an unexpected slowdown as exports fell due to the slumping global economy and rising costs of raw materials.

In the first six months, the tire output by the association's members was about 124 million units, an increase of 12 percent from the previous year, reports Reuters, citing an unnamed senior official of the association.

China is the world's biggest natural rubber consumer. However, it is also a country without natural rubber resources. In 2006, the natural rubber imports accounted for 70 percent of the nation's total consumption. Last year, the percentage grew to 75 percent.

"In the past, we had seen the growth rate at about 18 percent," says the official.

The association's 46 members account for about 70 percent of China's tire production, the official adds.

Statistics from Chinese Customs show that in the first half of the year, 160 million units of tires were exported from China, valued at $3.94 billion, rising 4.6 percent and 22.1 percent respectively from the same period last year.

However, the growth of the export volumes and revenue fell 17.6 percent and 18.6 percent respectively.

"Although tire output and sales growth was relatively strong, profits fell sharply, mainly because the prices of raw materials, especially natural and synthetic rubber, have surged, eating into companies' profits," the China Rubber Industry Association said in a statement on its website.

The profits of rubber association members fell 7 percent. Eight of them were in the red - 18.6 percent of the association's membership.

It also warned that if rubber prices do not ease, one third of the tire producers would be pushed into the red by the end of the year.

"In the second half, some manufacturing facilities in China may see closedowns," says an official of Doublestar Group Co Ltd in Shandong province, one of the top ten Chinese tire makers. "The export volume of our Doublestar tires dropped by 30 percent in the first six months.

"The costs of raw materials are growing too fast, breaking the balance between the cost and pricing. The depressed profit margin makes us unprofitable in the global market," he adds. "As a result, we can only export top-grade and high-value all-steel radial-ply tires."

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