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August 28, 2006 02:00 AM

CHINA-no slumbering giant

Bruce Davis
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    Anyone who still doubts the growing impact of China on the tire industry ought to look no further than this year's Global Tire Report.

    Consider that there are 17 Chinese companies ranked among the world's 75 largest tire companies in this year's report. Collectively they represent $6.4 billion in sales, or more than 6 percent of the estimated global tire business.

    The list includes the first billion-dollar tire manufacturer in China, GITI Tire Co. Ltd., a collective of six individual Chinese tire makers with headquarters in Singapore.

    >From mid-2005 to mid-2006, expansion projects totaling more than $900 million in China were disclosed-by both Chinese and international tire companies-bringing the investment dollars budgeted in the past four years to nearly $3.5 billion. At the same time, the Chinese government has put a hold on all bias-ply tire plant investments.

    Also consider this: There are now 196 tire plants in China with a U.S. Department of Transportation tire plant code, necessary for selling tires in the U.S. The list includes 61 DOT codes issued in just the past 18 months.

    Add in the production of industrial, motorcycle, scooter and other specialty tires, and China's impact grows even more.

    Included in the DOT code total are 20 tire plants operated by a baker's dozen of non-Chinese tire makers and which collectively represent another $2 billion to $3 billion in sales.

    The legion of U.S., European and Asian companies operating in China also continues to grow. The group is led by Bridgestone Corp. and Cheng Shin/Maxxis International with three plants, followed by Group Michelin, Hankook Tire Co. Ltd. and Kenda Rubber Industrial Co. Ltd. each having two.

    With Cooper Tire & Rubber Co. and Pirelli & C. S.p.A. each buying into Chinese tire makers in the past year, and Yokohama Rubber Co. Ltd. breaking ground on its first Chinese factory, only Continental A.G. among the world's top dozen tire makers is not present in China. Conti, however, has stated repeatedly it is negotiating in China for a partner/acquisition.

    Hankook has the largest tire production capacity (passenger and commercial vehicles) of the group, with its Chinese factories capable of producing 19.9 million tires annually.

    Industry sources indicate there are more than 300 tire plants active in China, although a measurable percentage of them make only bicycle or scooter tires and tubes.

    Taking just the major tire categories-passenger, light truck and medium truck/bus-China is the third largest producer in the world and perhaps the No. 1 exporter. It already ranks as the largest source of imported truck/bus tires in the U.S. and is No. 2 in both passenger and light truck tires.

    Need more? China is now the largest consumer of rubber in the world, eclipsing the U.S. two years ago in this honor.

    The growth is prompting suppliers to the tire industry to expand as well.

    A case in point is PetroChina Co. Ltd.-a former state-owned chemical concern now operating independently. The company plans to more than double its production capacity for synthetic rubber (SR) during the next four years by opening as many as five factories in China, according to Wang Guilun, technology officer in the synthetic rubber area of PetroChina.

    PetroChina operates five SR plants in China producing more than 400,000 metric tons of rubber a year.

    The new factories Petro-China is planning will add 530,000 tons a year to the company's production mix, Mr. Guilun said, with nearly all of the output dedicated to domestic Chinese use.

    SR production in China hit 1.63 million tons last year, Mr. Guilun said, but the country still had to import about 1.2 million tons to satisfy demand.

    Is it any wonder China accounted for more than $1 billion in imports last year?

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