China’s tyre industry facing five difficulties: ZC Rubber chairman, Shen Jinrong

The Chinese tyre industry is not optimistic about the future following the first half of 2022, which itself was something of a continuation of the problematic situation experienced in the country in 2021. In short, the overall Chinese tyre industry has experienced severe decline in profits. Shen Jinrong, chairman of ZC Rubber, China’s largest domestic tyre manufacturer and number nine in the world, made the comments during a recent speech at the China Rubber Conference 2022.

In Shen Jinrong’s view, Chinese tyre companies are facing five difficulties. Firstly, the Chinese government’s implementation of “peak carbon dioxide emissions” and “carbon neutrality” policies is to reduce the entire country’s carbon emissions, which significantly impacts the economy. Some energy-intensive industries are restricted. The total transportation volume within China has also decreased, considerably reducing the demand for commercial vehicle tyres.

Meanwhile, environmental protection policies have a continuous impact on China’s transportation market and tyre market. To meet environmental protection policies, some companies have changed the mode of transportation from road to rail and water. The tyre industry, closely linked to road transportation, has therefore been affected.

Additionally, Shen Jinrong believes that the original problems restricting the development of China’s tyre industry, especially the tariff issue on natural rubber, have not been resolved. It is reported that Chinese companies need to pay high tariffs when importing natural rubber. Therefore, some Chinese tyre companies have to use compound and mixed rubber as a substitute for natural rubber.

In addition to the original problems, China’s tyre industry has encountered new issues, such as rising labour and raw material costs. It is worth noting that Shen Jinrong emphasised that the price increase of raw materials is not a simple market cyclical fluctuation. He said that prices of at least two or more raw materials, including carbon black, are bound to rise. Due to the limited production capacity of steel companies, the shortage of coal tar has caused the price of carbon black to skyrocket.

Finally, the overall environment of the tyre market is not friendly. Shen Jinrong predicts that the demand for tyres in the domestic market will likely decline. Similarly, recent strong growth of tyre exports may slow down in the future.