China's tyre industry faces challenges in second half

ERJ staff report (DS)

Beijing the Tyre statistics branch of the China Rubber Industry Association (CRIA) reports that its members face a severe test in the second half of 2011. The challenges come from reduced demand for cars as well as rising raw material prices. The scandals facing Tianjin Kumho Tire also play their part, said the report. The report also notesd that bank interest rates are increasing, and this will add further pressure to local tyre makers.

Production of car tyres in the first six months reached 128 million units, of which 107 million were radial construction. This represents growth over the same period last year of 1.6 percent and 5.3 percent respectively. Revenues increased by around 20 perecnt, due to price increases, but tyre inventories rose by 32 percent.

CRIA reports that production growth declined sharply. The industry is also concerned about increased expenses associated with the development of new-technology tyres for low rolling resisya=tance and also the use of clean (EU-compliant) extender oil

CRIA says the industry still recognises the picture of three high and one low. That is to say production, sales, inventory and production costs are all high, but profits are lower. Member companies will have to adjust their product portfolios to increase profitability, said the group.

Some tyre makers are operating at just 50 percent of capacity, said the report.

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Press release from CRIA

Above Press release auto-translated from Chinese