Rubbers: Road of Sustainable Development Accompanied by Stable Growth

By Tong Yan

The development of China’s rubber industry slowed down further in 2013. According to statistics of the National Bureau of Statistics, the output of tires, as the leading products of the rubber industry, was 965 million pieces in 2013, an increase of 7.2% over the previous year. Of the total, the output of radial tires was 584 million pieces, an increase of 17.2%. The output of motorcycle tires was 31.34 million pieces, surging 31.9% year on year.

Industrial development was achieved through technical upgrading

In the past year, a series of factors have enabled the rubber industry to achieve simultaneous upgrades and development. The world’s first TPI (trans-polyisoprene rubber) commercial production unit with capacity exceeding 10kt/a was constructed by Qingdao TPI New Material Co., Ltd. and has started production. The product has unique properties of both rubber and plastics and is regarded to be a new polymer with extensive applications. Nd-BR developed by Dushanzi Petrochemical Co., Ltd. has provided another ideal rubber type to the production of modern, safe and energy-saving high-grade tires. The technology for the large-scale production of HNBR jointly completed by several units including Shandong Dawn Group Co., Ltd. has passed appraisal. The domination of the technology by foreign companies is therefore broken, and a new material option is provided to the manufacture of high-performance products.
There are compulsory requirements on energy conservation and emissions reduction. Two national standards have been issued for implementation. One is the “Norms for Energy Consumption per Unit of Tires” and the other is the “Norms for Energy Consumption per Unit of Carbon Black.” Export commodity inspection is no longer conducted upon some rubber products such as tires. In this way, not only is the commodity inspection fee exempted and the export cost reduced, the procedure is also simplified and efficiency is enhanced. Innovation is also conducted in institutional systems and mechanisms. The tire industry alliance, with Triangle Group Co., Ltd. as the lead and approved by the Ministry of Science and Technology, has started functioning. Meanwhile, industrial reform is being actively promoted. After acquiring 51% stakes in Xinjiang Kunlun Tire Co., Ltd. with RMB572 million, Double Coin Holdings Ltd. will also hold 51% stakes in Chaoyang Langma Tire Co., Ltd. through equity acquisition. Sailun Co., Ltd. has raised funds through the non-public issuance of stocks and held majority of stakes in G-UNI Industrial Co., Ltd.

Investors were enthusiastic and new capacity was built

According to statistics, the amount of investment to China’s rubber industry increased 15.2% in 2013. Projects that started construction were 9.1% more numerous, and 8.6% more projects were completed. Michelin Shenyang plant with a capacity of 10.00 million pieces/a sedan tires and 1.80 million pieces/a truck tires completed relocation and started production at the beginning of the year. The first phase of Hankook Tire Chongqing plant with a capacity of 800 pieces/d truck tires also started production soon afterward. The semi-steel radial tire expansion project in Hualin Jiatong Tire Co., Ltd. was completed in the middle of the year. The second phase of the all-steel jumbo OTR (off-the-road) tire project in Guilin Tire Factory made trial production and the capacity will be increased by 1 056 pieces/d. The second phase of the 300 000 pieces/a all-steel tubeless tire project in Boto Tire Co., Ltd. started production.
In terms of investment, the contract has been signed on the construction of a 3.00 million sets/a semi-steel truck radial tire project by Shandong Yinbao Tire Group Co., Ltd. in Dingyuan and the capacity of the first phase is hoped to reach 1.20 million sets/a. (See Table 1 for details.) The project of Henan production base to be constructed by Hummer Tire (Bo’ai) Technology Co., Ltd. has already been put on record. The 20.00 million pieces/a semi-steel radial tire project that started construction in Shandong Fengyuan Tire Manufacturing Co., Ltd. in May 2007 has resumed construction. The project of 24.00 million sets/a semi-steel radial tires and 1.20 million sets/a all-steel radial tires funded by Shengtai Group Co., Ltd. with a total investment of RMB3.5 billion is settled in Qingzhou of Shandong. Bridgestone has made an investment of RMB852 million in the expansion of its Wuxi plant and the capacity will be increased by 5 300 pieces/d to reach a total of 22 600 pieces/d. The second-phase project of the tire plant funded by Hankook Tire with an investment of US$350 million has started construction and after the start of production the output of passenger tires will be 15 000 pieces/d and the annual output value will reach RMB1.5 billion.

Exports rebounded

The recovery of the world economy and the end of the “tire special safeguard case” offered more opportunities for foreign trade, and as a result, exports from China achieved new growth in 2013. According to customs statistics, the growth of the export amount achieved by China during January-November was 12.9% for tires, 2.2% for rubber belts, 6.6% for rubber hoses, 4.2% for rubber shoes, 4.9% for rubber products and 4.9% for latex gloves. The amount exported to the United States, in particular, grew considerably. It should be mentioned that the rebound of exports has played a positive role in maintaining the growth of the rubber industry, mitigating the overcapacity in the domestic market and upgrading the quality of products.
Enterprises in China have also quickened their steps of “going out.” MESNAC has set up R&D in Akron of the United States and launched the project of Linglong Tire (Thailand) Co., Ltd. Zhuzhou Times New Material Technology Co., Ltd. has acquired the total assets of the BOGE rubber and plastic business in ZF Group of Germany with RMB2.425 billion. The further relaxation of restrictions on overseas investment of Chinese companies will facilitate the foreign trade transition and development of China’s rubber industry.

Table 1   Some investment projects in 2013 (RMB billion)

Company      Product    Investment      Capacity      Remark
Shandong Yinbao Tire Group Co., Ltd.     all-steel truck radial tires    
1.7      3.00 million sets/a    
Shifeng Double Star Tire Co., Ltd.     agricultural tires
-      2.00 million sets/a    first phase
Tianjin United Tire & Rubber International Co., Ltd. all-steel off-the-road radial tires    1.479    30 000 pieces/a    first phase
Jixing Tire Co., Ltd.     tires    
1.6    5.00 million pieces/a    first phase
Haifeng Tire Co., Ltd.     semi-steel radial tires    
2.0    12.00 million pieces/a    to be completed in September 2015


Natural rubber made negative impacts on the rubber market

The stabilizing trend of the economy both at home and abroad, especially the constraints to the automobile industry in China imposed by various factors such as environmental protection, energy and transportation, the domestic rubber industry’s economic development is somewhat restrained. The rubber industry sectors that are closely related to national economic development have also entered a period of meager growth. Some conditions for development have changed and there is interchange between opportunities and challenges. Natural rubber, which has always been a basic raw material holding back the development of the rubber industry, has been in abundant supply in both domestic and overseas markets in the past year and the price has been kept below RMB20 000/t. As a consequence, synthetic rubber market remain to be slack and the supply of raw material became loose. The rubber stabilization fund, on which a high hope was once placed, is shelved. Natural rubber is no longer just a raw material, but has acquired a more sweeping financial nature.

Overcapacity worsened and administrative policies need to be adjusted

Overcapacity is an inevitable product of the market economy system. Overcapacity in China’s rubber industry will still exist for many years in the future. The key is to give overall strategic consideration to measures for its mitigation. The government should ease its unduly strict control on this competitive industry and lower or even cancel the admission threshold. The survival of the fittest in the rubber industry should be achieved through competition with the guidance by industrial policies and development programs, as well as the strict supervision by standards, legislations and environmental protection regulations.

Prospects in 2014

The output value of China’s rubber industry will hopefully reach RMB1 trillion in 2014. With the combined results of the slowdown in growth, the readjustment to industrial structure and the playing out of previous years’ stimulus policies, overcapacity will be aggravated, economic returns will decline further, and transformation and upgrading will encounter many new difficulties. Due to the price reduction of products and the narrowing of the profit space, efforts should be made to update development ideologies and concepts promptly, transform from product manufacturers to manufacturing service providers and obtain cash returns on value-added services. In this way, brands can be cultivated, channels can be opened and industrial chains can be extended. Experiences of foreign companies should also be taken as reference. Aeolus Tire Co., Ltd. has already started attempts in this field. The dissemination of green manufacturing should be further promoted. Equal emphasis should be laid on green manufacturing and green consumption. Otherwise green manufacturing would be hard put to achieve anything alone. Innovation should also be conducted to forms and methods of foreign trade so as to reduce the proportion of processing trade, identify regional market segments and apply different policies in different cases.