Shen Jinrong: The competitive advantage of Chinese tyres may be disappearing
On 22 March, Shen Jinrong, chairman of ZC Rubber, summarised the Chinese tyre industry after the epidemic at the China Rubber Conference 2023. He said that during the three years of the epidemic (2020-2022), China’s tyre industry’s business environment and ecological chain had undergone significant changes.
In Shen Jinrong’s view, China’s tyre manufacturing industry faces multiple difficulties. The upstream supply of raw materials and downstream market demand jointly squeeze China’s tyre manufacturing. Shen Jinrong publicly expressed his doubts in his speech: “Do tyres still need to be manufactured in China? Where are the comprehensive advantages of the Chinese tyre industry?” He believes that the global competitive advantages that have existed in Chinese tyre companies (including Chinese companies and factories in China belonging to international companies) for decades may be disappearing.
Tyrepress China learned that China’s tyre industry is losing its traditional advantage – carbon black. Unlike tyre companies in other countries, the carbon black used in Chinese tyre manufacturing for a long time came from coal tar. As China regulates the environment and carbon emissions, the use of coke in the Chinese market is declining. As a derivative product of coke, the output of coal tar has declined and further affected the supply of carbon black to tyre manufacturers.
In addition, the supply of SSBR rubber also needs to attract attention. Shen Jinrong said the demand for SSBR rubber in Chinese tyre companies is increasing rapidly. However, the R&D and production of such products have failed to keep pace with the national market.
During the pandemic, the global tyre supply chain was not normal, and Chinese tyres relied on foreign trade to support the development speed of slight growth. Shen Jinrong believes that with the end of the pandemic in the world, the global supply chain has gradually recovered, and Chinese tyre companies cannot be blindly optimistic about the demand in the international market.
At the same time, the cyclical fluctuations in the global tyre market have entered a downward range. The situation in China’s domestic market is not particularly optimistic. China is adjusting its economic structure and causing a rapid decline in demand for truck tyres. In Shen Jinrong’s view, China’s economic and transportation structures are changing, leading to an irreversible decline in the demand for tyres in the Chinese market.
As for Chinese tyre manufacturers, Shen Jinrong believes severe overcapacity still exists. In 2022, only a few tyre companies in China maintained a relatively high production load. According to statistics, the average operating rate of all-steel radial tyre factories (TBR) is 64.6 per cent, and that of semi-steel radial tyres (generally PCR) 71.3 per cent.
In addition, Shen Jinrong also focused on the rapid rise in costs. In the last year, the average energy cost of China’s tyre industry increased by at least 20 per cent. Rising energy prices have an impact on the entire tyre industry chain. It is reported that the effect of rising electricity prices on steel cord companies is much higher than that of tyre manufacturers. The labour costs and environmental protection expenditures of tyre companies are also increasing.
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