Rubber Firms Innovate

By Li Shiqiang, Tong Jingjing, China Rubber Industry Association

Market growth for tires and rubber parts is faster than expected

Passenger car tires and related automobile products have always been the bright spot of the rubber sector in China. Stimulated by a policy reducing or exempting automobile purchase taxes, the output and sales of sedans and the consumption of related products increased rapidly in 2016. The output of passenger cars was 21.74 million pieces and the sales volume was 21.68 million vehicles during January-November 2016, increases of 15.56% and 15.57% over the same period of the previous year. Industry performance with regard to commercial vehicles, heavy-duty trucks in particular, was even more outstanding. The output of commercial vehicles was 3.28 million vehicles, and 3.27 million were sold during January-November, increases of 6.31% and 5.30%. Within that sales total, 0.50 million were heavy-duty trucks, an increase of 31%. A dramatic rebound sale of tires and automobile parts was thereby promoted.
The output of tire casings in China was 860.72 million pieces during January-November 2016, an increase of 7.5% over the same period of the previous year. Of that total, the output of radial tire casings was 626.87 million pieces, an increase of 11%, and the output of motorcycle tire casings was 103.83 million pieces, an increase of 7.6%. Moreover, 539.51 million pairs of rubber shoes were made, an increase of 5% over the same period of the previous year.
Previous years’ mergers, closures and relocations in the rubber industry have effectively mitigated capacity surplus. Take the tire sector for instance. A group of outdated and weak/small producers quit the market. Resources are now more concentrated in advantageous enterprises with respected brands. The average economic return improved notably.
According to statistics of China Tire Industry Association, the sales revenue of radial tires in 41 major member enterprises was RMB110.88 billion during January-October 2016, an increase of 2.45% over the same period of the previous year. The output of radial tires was 283 million pieces, an increase of 9.3%. The output of all-steel radial tires was 72.69 million pieces, an increase of 6.29%. The combined profit earned by member enterprises was RMB4.77 billion, an increase of 19.24%. Rubber product sales also grew dramatically. The combined sales revenue of rubber products in 44 member enterprises during January-October was RMB19.78 billion, an increase of 4.60%. Among major automotive rubber products, the output of shock-reducing parts was 4.26 billion pieces, an increase of 13.08% and the output of “O” ring seals was 1.12 billion pieces, an increase of 2.83%. Member enterprises earned combined profits of RMB2.47 billion, an increase of 20.21%.
Foreign tire markets have grown steadily. The export volume of passenger tires in China was 171 million pieces during January-November 2016, an increase of 8.6% over the same period of the previous year. The export volume of truck and passenger car tires was 30.29 million pieces, an increase of 6.6%.
A rebound of demand has boosted consumption of raw materials. Consumption of both natural rubber and synthetic rubbers in 2016 was much higher than expected. Growth of natural rubber and synthetic rubber consumption in 2016 is estimated to have been around 7%. So raw material inventories were sold down, supplies now remain short and rubber prices have rebounded dramatically.

Enterprise transformations and upgrades under way

Quite a few tire enterprises in China drew from the capital market in 2016. Linglong Tire Co., Ltd., Triangular Tire Group Co., Ltd. and General Tire Co., Ltd. were all newly listed in the stock market. These three enterprises will invite more external capital to increase their market shares and improve their brands’ standing.
M&A by Chinese enterprises has not slowed down either. Integration was completed smoothly in the acquisition of Pirelli by SinoChem. Chinese enterprises have actively participated in the sales of stocks by Kumho Tire. The respective capacities of Linglong Tire Co., Ltd., Zhongce Rubber Group Co., Ltd., Triangular Tire Group Co., Ltd., Double Coin Group Co., Ltd., Sailun Jinyu Group Co., Ltd. and Sentury Tire Co., Ltd. have all increased steadily after these firms stepped outside China.
In 2016, many tire enterprises actively launched smart manufacturing and rapid transformation to overcome development bottlenecks. Smart manufacturing lines were completed and put on stream by Sentury Thailand Plant, Triangular Huayang Plant, Hefei Wanli Tire Co., Ltd. and Qingdao Double Star Group Co., Ltd.