Domestic tyre industry knockout is open
Chinese tire companies are in crisis. According to the final results of the United States International Trade Commission on July 27, 2015, the anti-dumping countervailing investigation of passenger and light truck tires originating in China was finalized; this means that Chinese tire manufacturers export to the United States. High anti-dumping and countervailing duties will be imposed.
According to the expected process, after the final results of the US International Trade Commission are issued, the US Department of Commerce should issue a final tax order on August 3. According to the final ruling of the US Department of Commerce on June 12, this tax rate should be 14.35%. -87.99% of anti-dumping duties and 20.73%-100.77% of countervailing duties.
Although the tax decree has not yet been issued as of now, according to the media, there is no possibility of a substantial reduction in the final tax rate.
At the same time, the media learned that some domestic tire companies have adopted measures such as increasing exports to the EU and establishing overseas factories to reduce the impact of the industry; while on the issue of excess domestic tire capacity, analysts believe that industry consolidation is inevitable.
Domestic Tire Export Volume and Price Falls
According to statistics released by China Customs, China exported 220 million tires in the first half of this year, a decrease of 3.2% from the same period of last year, and this decline was affected by the US market; among the major exporting countries, 38.25 million were exported to the United States. The decline rate reached 19.1%. "The United States has always been the largest market for Chinese tire exports."
An expert from the China Rubber Industry Association's tire branch told the media that 40% of domestic tire production was exported, while the U.S. market accounted for more than a quarter of exports. "The United States' dual reaction to the Chinese tire companies will have a great impact." Zhao Ying, director of the Industrial Development Office of the Institute of Industrial Economics of the Chinese Academy of Social Sciences, told the media that "the adverse effects are more concentrated on local companies."
According to the report of Race Wheel Jinyu, revenue from the U.S. market in 2014 accounted for about 10% of the total revenue of the team's Jinyu, and its profit accounted for 13.36%; and in the final ruling of the US Department of Commerce on June 12th, Sai Jinyu was convicted. After collecting 14.35% of anti-dumping duties and 30.87% of countervailing duties, and deducting export subsidies and double relief, the combined "double reverse" tax rate is as high as 30.61%.
In fact, in the Chinese tire companies that were surveyed by the “Double-Counter†survey, the situation of the racing wheel Jinyu was not the worst. According to statistics, in the “double reverse†of the United States, there were more than 200 Chinese tire companies involved in the case, of which the state-owned tire companies were ruled with “double reverse†tax rates exceeding 100%, while other companies averaged around 40%.
According to the data released by the Department of Raw Materials Industry of the Ministry of Industry and Information Technology, the average operating rate of the tire industry in the first six months of this year was only around 60%, which was more than 10% lower than the same period of last year. According to the statistics of the National Bureau of Statistics, the output of tires in the first half of this year was 455 million, which was the same Declined by 3.9%.
In addition to the decline in output, the United States' "double reverse" has also directly led to a decline in the prices of export tires. According to customs statistics, the average price of tire exports in the first half of this year was 190.3 yuan per item, a year-on-year decrease of 10.3%.
Overcapacity problem remains to be solved
The share of the U.S. market in exports has changed with the "double reverse". According to China Customs statistics, in the first half of this year, Chinese tire manufacturers’ exports to the EU surpassed the United States for the first time, reaching 48.7 million, a year-on-year increase of 7.7%. "Because of the risks in the U.S. market, many tire companies have turned some of their businesses to the European Union." The above-mentioned tire branch experts explained to the media, but this shift is not easy.
According to reports, the European Union’s tire labeling law imposes strict regulations on the fuel efficiency, rolling noise, and wetland gripping force of tire products sold in the European Union. Many Chinese tire companies’ products do not meet the requirements.
In addition, some domestic tire companies with relatively strong strengths are trying to set up factories overseas to carry out business. For example, the Sailing Group will form an annual output of 7.8 million semi-steel radial tires and 15,000 all-steel radial tire factories in Vietnam; Production capacity of 12 million sets of high performance semi-steel radial tires and 1.2 million sets of BTR tires has been put into operation in Thailand.
However, all this is not as beautiful as it looks. In the view of some tire companies, shifting production capacity to rubber origins such as Southeast Asia, while reducing the purchase price of natural rubber, has also brought additional problems. "China has formed a complete tire industry chain, but most Southeast Asian countries still do not have such an industrial chain." The tire branch experts told the media that after the construction of Southeast Asian tire production base still need to import some raw materials from the country, which Instead, the cost of overseas production rose. "Some manufacturers have called for the reduction of export tariffs on these raw materials, but there has been no progress."
According to the analysis, the branding and technical capabilities of Chinese tire companies are still difficult to compete with joint venture brands and foreign brands in the domestic market, especially in the passenger vehicle market. Therefore, industry consolidation and the elimination of backward production capacity caused by overcapacity are still inevitable.
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