Rubber Industry in 2010 -- A Review   

According to data from China's National Bureau of Statistics, in the first 11 months of 2010, China's large and mid-sized rubber enterprises achieved a total sales income of RMB418.368 billion, up 12.34% year on year, a total profit of RMB25.655 billion, up 64.71%, and a total export value of RMB85.19 billion. Among major rubber products, the output of tires reached 590 million pieces, up 15.6% year on year, of which the output of radial tires was 269 million pieces, up 12.4%; and the output of rubber shoes was 1.83 billion pairs, down 1.8%. According to China's customs data, in the first months of 2010, China's export volume and value of tires were 177 million pieces and US$6.504 billion, down 0% and 8.23% year on year; respectively; the export volume and value of motorcycle tires were 11.99 million pieces and US$72.62 million, down 8.6% and 11.1%, respectively; the export volume and value of bicycle tires were 74 million pieces and US$127 million, down 21.1% and 19.7%, respectively; the export volume and value of conveyer belts were 69 000 tons and US$169 million, down 21.4% and 24.4%, respectively; the export volume and value of hoses were 72 000 tons and US$257 million, down 15.3% and 14.05%, respectively; and the export volume of rubber shoes was 3.398 billion pairs, down 44.7%. After the global financial crisis, China's rubber enterprises have become more mature and have a better ability to deal with complicated situations at home and abroad. Despite dramatic economic fluctuations at home and abroad, their performance is better than expected.

1. Adhere to technological progress and innovation

Triangle Group's low-temperature continuous rubber mixing technology has transformed the rubber mixing process from a multi-step batch process into a one-step continuous process. It has lowered the comprehensive energy consumption of rubber mixing to less than 900 kg of standard coal per ton of rubber, down 27%, and improved productivity and land resource utilization significantly. China's National Tire Technology and Control Engineering Technology Research Center and other enterprises plan to jointly invest RMB37.6 million to build a 4-hectare micro tire testing ground in Qingdao, which can be used for field tests of design performance of tires and can also provide tire makers means for testing the maneuverability, torsion resistance, noise performance, skid resistance, rolling resistance, slip resistance and road adhesion of their tire products and will provide instructions for the future construction, operation and management of tire testing grounds. The development of isoprene rubber production technology, a national key technology development project led by the Research Institute of PetroChina Jilin Petrochemical Company, has made new progresses: rare earth isoprene rubber has for the first time successfully been applied in all-steel heavy truck radial tires. A trans-isoprene rubber industrial production unit is under construction in Qingdao. China will soon achieve the industrialization of man-made "natural rubber." This can effectively alleviate the shortage of natural rubber in China. In addition, Shandong Linglong Rubber Co., Ltd. has developed ultra-high-performance car tires with low profile, good anti-slippery and low noise; Wuxi Boton Belt Co., Ltd. has developed coal mine-purposed high-performance energy-saving laminated flame-retardant conveyor belts, and Qingdao University of Technology has developed a complete set of equipment for the high-value-added remanufacturing of waste and used special engineering tires. These technological achievements have got recognition and rewards from relevant authorities. This shows that China's rubber industry is increasingly relying on technological progress and innovation to improve its competitiveness and to change its development mode.

2. Huge investments are actively put in China

Japan's Toyo Tire & Rubber Co., Ltd. set up a wholly owned subsidiary in Zhangjiagang, Jiangsu Province. Yokohama Rubber Co., Ltd. is building its Phase IV tire project in Hangzhou, Zhejiang Province. A Taiwan tire company is building a new 10 million piece /year tire project in Chongqing. Japan's Sumitomo Rubber Co., Ltd. will set up a tire plant in Changsha, Hunan Province. Michelin will relocate and expand its tire plant in Shenyang, Liaoning Province. Hankook Tire Co. Inc. (Hankook) will build a tire plant in Chongqing. Multinational tire giants are actively investing hundreds of millions or even billions of dollars in China. This shows that foreign investors are confident in the Chinese market. This also shows that foreign tire giants no longer regard China only as a manufacturing base but regard it as having an important role in promoting their global strategies.

3. Industrial Policy for Tire Industry finally comes out

The launch of the Industrial Policy for Tire Industry can effectively promote the scientific development and industrial structure optimization and upgrading of China's tire industry. This policy can well regulate the investment and market behavior of the industry, but it also faces many challenges. For example, although this policy claims to limit the construction of new tire capacity in China within the next three years, Michelin invests huge capital to expand its tire capacity in Shenyang, and Hankook plans to build its third tire plant in Chongqing. Although the tire industry has for many years called for lowering the import tariff on natural rubber, the import tariff will still remain high in 2011.

4. Natural rubber prices soar

The reasons for soaring natural rubber prices are complex. The interaction of international markets, the capitalized operation of bulk raw materials and the excessive speculation in the futures market have provided space for speculation in the natural rubber market, which has a strained supply and demand relationship. Frequent natural disasters at home and abroad increase concerns about the future supply of natural rubber. Although China's National Reserve Bureau does not put large amounts of natural rubber into the market and the import tariff of natural rubber is not reduced, the price of natural rubber recently dropped from RMB38 000 /t down to RMB32 000 /t in China. This shows that the root cause for the soaring natural rubber prices is excess hot money. Due to high anticipation for natural rubber price hikes, dealers increase their natural rubber inventories, artificially distorting the supply and demand balance of the natural rubber market.

5. Imports of used tires and waste rubber trigger hot controversies again

The import of used tires and waste rubber is an old topic. But because two related associations do not have consensus on this topic, the Chinese government has been unable to make decisions on this issue for a long time. The core of the problem is how to reasonably utilize imported waste rubber (tires) under effective supervision. So, it is necessary to seek a balance between the import and restriction of waste rubber and used tires. The government should neither completely ban the import of waste rubber and used tires because of their environmental and safety risks nor turn a blind eye on their possible risks. The government should formulate workable standards to distinguish waste and used tires to facilitate customs authorities and supervision and inspection departments to supervise and manage them. After waste and used tires are imported, they should be treated with different methods according to their sources. Especially, retreaded tires require a very high safety factor. The government should establish a complete safety inspection system covering all the processes from the selection of used tires to the testing of retreaded tires.

6. Exports gradually stabilize and trade friction may recur

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