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The New Year's bell has sounded, but the WTO panel has not ruled that the US’s special safeguard measures against Chinese tire imports violated the rules of the WTO, coupled with the continued rapid rise in the price of natural rubber, which has ushered in the tire industry in China. A more difficult year.
Double Test Extrusion of Domestic Tire Enterprises
In the last trading day of 2010, the main contract of futures rubber 1105 closed at 37,190 yuan, up by 645 yuan over the previous trading day and up by 15,040 yuan from the close of July 2nd, with an increase of 1.76% and 68% respectively.
Zheng Yongxiang, vice chairman of Shandong Rubber Industry Association, said: “From 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. “Some 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 35%, 30%, and 25% special ad valorem tariffs 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 States’ 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 one year, and the substantial impact on domestic tire companies has already formed. "Even if the WTO continues to maintain its current ruling, the possibility of a greater impact on the domestic tire industry's foreign trade has become less of a concern. Because of the special case of tire protection, China's tire companies' exports to the United States have been blocked and they have lost nearly 40% of the overseas market at that time. â€
“The domestic tire companies are actually facing a double test, one is the rapidly rising raw material prices, the second is to continue to lose the US market share. Two factors will make tire companies face a more complex environment in 2011.†Zheng Yongxiang said.
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.
Tire manufacturing is one of the most advantageous industries in Shandong Province. Its tire production capacity, output, and research and development capabilities have been among the highest in the country for many years. At present, Shandong has more than 4,000 rubber processing enterprises, and its 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.
“The start of construction of these new projects will inevitably bring fierce internal competition to the rubber tire industry. In particular, the competition of high-end management talents and skilled workers will affect the current business operations and the operation of new projects after they are put into operation, or even appear. Because of the flow of skilled workers, the quality of the products has been reduced, etc." said Zheng Yongxiang.
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: “Now 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 suffered from 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 to previous years, and the price of natural rubber has risen rapidly.
Xing Zheng, a natural rubber analyst at Luneng Jinsui Futures, said that the drop in natural rubber production and prices have led some domestic traders to think that they have the opportunity to begin their influx into the natural rubber market. “Including Jiangsu and Zhejiang's hot money, natural rubber this year is expected to continue to grow, a large amount of money into the natural rubber futures market, driving up prices, and futures prices have further affected the spot market of natural rubber, but also led to the spot market price increases. â€
Zheng Yongxiang said: “Because the prices have been rising, the original fast-growing natural rubber planting enterprises have experienced the phenomenon of reluctant sellers. In addition to the traditional natural rubber planting enterprises and import companies, some companies that originally only engaged in the processing of natural rubber began hoarding natural rubber. The market supply is more intense."
Some experts and people in the industry believe that rubber is an important strategic material. China has established some rubber plantations and bases in four provinces in the southwest, but the output is not high. In order to protect the domestic natural rubber planting base, China has raised the import tariff by 20% since its entry into the WTO, which has formed an unequal competition between China's tire processing 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 encouragement policies were introduced to increase the output of synthetic rubber and increase the cultivation of alternative crops of other natural rubber. Zheng Yongxiang said that there are many types of synthetic rubber, one of which is based on the molecular structure of natural rubber, which can partially replace natural rubber and is 20% cheaper than natural rubber. The state should increase support to increase the output of synthetic natural rubber.
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