LONDON — Last year was another polarizing year for China's tire sector.
The country's tire production in 2017 increased by 5.4 percent from 2016 to 926 million units, a third of the global total. Tire makers' production had a 7.1 percent rise to 653 million units, data from China's ministry of industry and IT also shows.
Radial tire production climbed 8.5 percent to 613 million units — including 131 million truck and bus tires, up 8.2 percent year-on-year, and 482 million passenger car tires, up 8.5 percent year on year—while bias tire production dropped 11.1 percent to 40 million units.
Due to a series of factors, including volatile feedstock prices, supply surpluses, rising labor costs and tightening environmental regulation, China's tire manufacturing costs have risen above those in south east Asia, south Asia and eastern Europe and to over 90 percent of those in the U.S., according to an analysis by Dalian Custom District.
Low capacity utilization rates also were a common scenario last year. Company profits in 2017 declined by 49.6 percent against the backdrop of an 11 percent jump in China's total motor vehicle parc to 310 million units, including 23 million trucks with over 3 million newly registered ones — a record-high increase.
Company shutdowns
The situation was worse for smaller players. Last year, 27 tire companies shut down in the country with a total bankruptcy auction price of $184.9 million — some were auctioned more than once.
Market conditions worsened last year in the world's largest tire exporter country as India, the European Union, the U.S. and Turkey launched antidumping and countervailing undertakings against China's tire exports.
In August, India determined China was dumping pneumatic radial tires and imposed duties of between $245 per metric ton and $452 per ton since September.
The EU started its antidumping investigation on China's truck and bus tires in August and expanded it to countervailing duties in October. The process led to the imposition of steep provisional tariffs on China-based manufacturers effective from February 2018, ahead of a permanent ruling by the year-end.
In September, the United Steelworkers of America filed for the revocation of an earlier determination against substantial damage from China's truck and bus exports, restarting this trade war. Turkey also announced it was to continue imposing a 60 percent antidumping tariff on various types of Chinese tires in December.
Overseas investment
On account of trade friction and rising labor costs, companies with enough resources have been setting up manufacturing sites overseas, especially in the regions backed by China's Belt & Road Initiative.
A number of the market leaders already have started up plants, such as Sailun in Vietnam, and Zhongce, Linglong, Double Coin and Sentury in Thailand.
Projects in the pipeline include Prinx Chengshan's $322 million plant and Wanda Baotong Tyre's $253 million plant in Malaysia, Guizhou Tire's $400 million plant in Vietnam. Triangle and Sentury are mulling new sites in the U.S. and Linglong in Europe.
The sector bellwethers also have been upping their efforts in research and development for technology upgrades, making recent breakthroughs such as Linglong's dandelion rubber tire, Shandong Fengyuan Tire Manufacturing's carbon nanotube tire, Sailun's high-performing green tire using EVEC rubber material, T-rubber's new application of gutta-percha in aircraft tire and Triangle's fully electromagnetically heated direct pressure curing process and machinery.