Another tough year for Chinese tire makers

Article published in ERJ’s July/August 2018 issue

Feedstock, environmental rules and utilisation rates add to issues facing China’s tire manufacturers, reports Jane Ho

Last year was another polarising year for China’s tire sector. The country’s tire production in 2017 increased by 5.4% from 2016 to 926 million units, a third of the global total. Tire makers’ production had a 7.1% rise to 653 million units, data from China’s ministry of industry and IT also shows.

Radial tire production climbed 8.5% to 613 million units – including 131 million truck and bus tires, up 8.2% year-on-year, and 482 million passenger car tires, up 8.5% year on year – whilst bias tire production dropped 11.1% to 40 million units.

Due to a series of factors, including volatile feedstock prices, supply surpluses, rising labour cost and tightening environmental regulation, China’s tire manufacturing costs have risen above those in south east Asia, south Asia and eastern Europe and to over 90% of those in the US, according to an analysis by Dalian Custom District.

Low capacity utilisation rates were also a common scenario last year. Company profits in 2017 declined by 49.6% against the backdrop of an 11% jump in China’s total motor vehicle parc to 310 million units, including 23 million trucks with over 3 million newly registered ones – a record-high increase.

Company shutdowns

The situation was worse for smaller players. Last year 27 tire companies shut down in the country with a total bankruptcy auction price of 1.3 billion yuan (€174 million) – some were auctioned more than once.

Market conditions worsened last year in the world’s largest tire exporter country as India, the EU, the US and Turkey launched anti-dumping and countervailing undertakings against China’s tire exports.

In August India determined China was dumping pneumatic radial tires and imposed duties of between $245 per tonne and $452 per tonne since September.

The EU started its anti-dumping investigation on China’s truck and bus tires in August and expanded it to countervailing duties in October. The process led to the imposition of steep provisional tariffs on China-based manufacturers effective from February 2018, ahead of a permanent ruling by the year-end.

In September, the United Steelworkers of America filed for the revocation of an earlier determination against substantial damage from China’s truck and bus exports, restarting this trade war. Turkey also announced it was to continue imposing a 60% anti-dumping tariff on various types of Chinese tires in December.

Overseas investment

On account of trade-friction and rising labour costs, companies with enough resources have been setting up manufacturing sites overseas, especially in the regions backed by China’s Belt & Road Initiative.

A number of the market leaders have already started up plants, such as Sailun in Vietnam and Zhongce, Linglong, Double Coin and Sentury in Thailand.

Projects in the pipeline include Prinx Chengshan’s €275 million plant and Wanda Baotong Tyre’s $253 million plant in Malaysia, Guizhou Tire’s €342 million plant in Vietnam. Triangle and Sentury are mulling new sites in the US and Linglong in Europe.

The sector bellwethers have also been upping their efforts in research and development for technology upgrades, making recent breakthroughs such as Linglong’s dandelion rubber tire, Shandong Fengyuan Tire Manufacturing’s carbon nanotube tire, Sailun’s high-performing green tire using EVEC rubber material, T-rubber’s new application of gutta-percha in aircraft tire and Triangle’s fully electromagnetically heated direct pressure curing process and machinery.