China's tire industry is facing major changes in the ecological environment

After three years of epidemic and global supply chain shocks, China's economic restructuring, Russia-Ukraine conflict and other events, China's tire industry has undergone major changes in its living environment and ecological chain. At the 2023 China Rubber Annual Meeting held by the China Rubber Industry Association, Shen Jinrong, senior Vice president of the Chinese Rubber Association and chairman of Zhongce Rubber Group Co., LTD., delivered a speech entitled "China's tire industry in the post-epidemic era", which caused extensive discussion and attention in the industry.

Starting from the upstream and downstream and the tire industry itself, Shen Jinrong reviewed and sorted out the severe environment facing the industry. In the upstream, the advantage of carbon black in China's tire industry is weakening, the demand for natural rubber has not substantially improved, and the medium and long term demand is still weak. Synthetic rubber is more vulnerable to environmental protection, "dual carbon" policy, geopolitical conflicts, international supply chain fluctuations, etc., and price fluctuations are more drastic. In addition, under the influence of environmental protection policies, the trend of differentiation of rubber auxiliaries has intensified, and antioxidant and anti-coke agents have sprung up. The weakening of downstream demand has become an irreversible trend, and the export market accounts for half of China's tires.

China's tire industry is also facing pressure from downstream, weakening demand has become an irreversible trend. According to Shen Jinrong, Chinese tire companies should not be blindly optimistic about international market demand. In the past two years, China's tire industry mainly relies on foreign trade to support the development rate of micro growth, but that is in the global supply chain is not normal to achieve results. Now, the global supply chain is gradually recovering, the factors of foreign trade export growth have gradually disappeared, and the international market demand has returned to the real world.

At the same time, the global tire market cyclical fluctuations have entered the downward range. The demand for truck and bus tires, represented by all-steel radial tires, is also declining rapidly. Shen believes that this trend is irreversible. In addition, the rise of new energy vehicles, made in China in the forefront, reversing the situation of passenger cars to foreign brands, which may affect China's tire industry.

European and American countries began to emphasize "nearshore outsourcing" and "friend-shore outsourcing", putting the so-called "supply chain security" above the product itself. This has also had an impact on the Chinese tire industry.

For the tyre industry itself, Mr Shen said overcapacity and rapidly rising costs were challenges. The elimination of backward production capacity in the tire industry is still slow, and the overall production capacity of the industry is still seriously excess. Due to local regional conflicts and international policy factors, the proportion of power costs in tire production costs is rising rapidly. At the same time, the problem of high tariffs on imported natural rubber is still unresolved. In this case, rising energy prices are likely to become a major factor in changing the cost structure of Chinese tires. Second, domestic labor costs continue to rise. In terms of labor costs alone, China has become the highland of labor costs in addition to Europe, the United States and Japan. In addition, the environmental protection expenditure of tire companies is also rising rapidly, and has become a non-negligible factor in the composition of tire production costs.

Despite the difficulties, Shen Jinrong also sorted out the advantages that China's tire manufacturing industry still has: the acceleration of domestic industrial technological progress, the gap between the manufacturing level and the world's advanced level is rapidly narrowing; With intelligent manufacturing as the lead, the per capita efficiency of domestic tire enterprises is improving; New technologies and new materials are widely used; China has a complete industrial chain; There is still great potential for energy conservation and consumption reduction in the tire industry.

For the future of the tire industry, Shen Jinrong said that the ecological environment of China's tire industry has undergone major changes, and some changes may be irreversible. Only by redoubling efforts to offset the negative factors that have occurred with positive changes can tire practitioners maintain the advantage of "made in China" tires. At the same time, tire companies need to speed up technological progress and transformation and upgrading, strengthen investment in environmental protection and energy saving, and constantly improve their competitiveness and sustainable development capabilities.

In Shen Jinrong's speech, he believes that China's tire industry needs to be aware of the current challenges and strive to find ways and solutions to the problem. At the same time, Shen Jinrong also hopes that the entire industry can work together to strengthen information exchange and resource sharing, and jointly promote the healthy and stable development of China's tire industry.