For most tire companies in China , 2017 is a tough year. According to official data, Chinese tire enterprises' profits fell by more than 70% in the first half of 2017. In the second half things seemed to get better, but the drop of profit stayed above 58%.
“The industry isn’t healthy enough. The dramatic price change of natural rubber leads to the huge shock of the tire industry. This is a congenital defect of Chinese tire industry.” said Shen Jinrong, ZC Rubber’s chairman of the board.
The “congenital defect” mainly refers to the supply and pricing mechanism of China's natural rubber. China’s natural rubber futures market is extremely vulnerable to capitals, and the price change of the futures market has immediate impact on the product price.
“High quality and inexpensive” has been labeled as the main advantage of Chinese tires. However, the advantage is disappearing. The rapid development of Chinese tire industry is inseparable from the fast increase of relevant supporting industries such as carbon black, steel cord, rubber auxiliaries, moulds, machinery and equipment.
“The situation is changing,” said Shen.
Shen found that more and more related industry companies have been paying visit to China because they can feel the future opportunities in the country.
China's coal tar type carbon black is losing the traditional price advantage. In addition, the price of China's labor force isn’t particularly cheap any more.
“We can feel the crisis is coming, and we have to face the real challenge—how to stay competitive,” said Shen.
