Having just experienced 2009 blowouts, the tire industry is facing downward pressure. According to Fan Rende, president of the China Rubber Industry Association, the tire industry had a hard time in 2010 and faced a "triple door" of rising costs, difficulty in raising prices, and blocked exports.

Pressure, what should Chinese tire companies do? What are the voices of the industry? Recently, the reporter interviewed Fan Rende for this purpose.

Natural rubber prices rise, it is recommended to cancel import tariffs

Reporter: The production cost of tire companies has risen greatly, and the supply of goods is also relatively tight. How does this affect the business? How should we respond?

Fan Rende: Last year, the tire industry's profit margin reached 5%, while the normal rate of profit was 3%, mainly due to the sharp decline in raw material prices. After a good period of time, the price of natural rubber began to rise sharply from the second half of last year and now exceeds $3,000/ton. In the face of rising costs, enterprises should make efforts to adjust the structure and save energy. This is the most fundamental way out.

Reporter: Is the increase in natural rubber prices due to supply shortages?

Fan Rende: The sudden and substantial rise in the price of natural rubber, it feels like it is not enough resources, but it is not. According to our forecast and the prediction of the International Rubber Research Organization, the supply and demand of natural rubber should be a basic balance. The current rise in the price of natural rubber is largely due to the speculation of speculative funds, making the market more confusing. We believe that the price of a relatively healthy international natural rubber market should not fluctuate drastically.

Reporter: China lacks natural rubber. Can it increase the natural rubber self-sufficiency rate? I have seen companies already growing their own natural rubber.

Fan Rende: Affected by the geographical environment, natural rubber produced in China is unlikely to grow substantially, and has remained around 600,000 tons in recent years. 70% of natural rubber depends on imports. Nowadays, many companies go abroad to grow natural rubber, but the tariffs at the time of import basically do not enjoy preferential policies, and they are just as high tariffs as foreign natural rubber. Most countries import zero-tariff natural rubber, but China has always imposed relatively high tariffs. There has been a decline, but it is basically useless. Our proposal is zero-tariff and supports domestic enterprises to go abroad to develop natural rubber.

Difficulties in product price increase, efforts should be made to adjust the structure

Reporter: Under the current situation of significant increase in costs, it is difficult for tire companies to respond to price increases. Why? Is it because of overcapacity in the industry?

Fan Rende: This year's increase in domestic demand should decline, and tire prices are difficult to lift. Affected by policies last year, the domestic tire market has risen by at least 30 million units. This year's car growth can no longer be like last year. The investment in domestic infrastructure will also increase, but the intensity will weaken. Therefore, the benefits of the tire industry this year may be lower, but the output and output value will still maintain a certain increase.

The topic of excess capacity is more sensitive. Tire excess capacity is a potential problem and should be alerted. Some products with relatively low technological content are overcapacity, but some high-end products that meet the requirements of low-carbon economy are still insufficient.

Reporter: Can we say that there is a structural overcapacity?

Fan Rende: I can say that. The structure is irrational and the growth that really requires development is slow, but it does not really need to grow faster. Therefore, we must adjust the product structure and develop high-end products. Nowadays, low-carbon economy is increasingly demanding for radial tires. For example, fuel-saving performance requires lightweight tires, low resistance, and low energy consumption. More expensive tires can save more than 20% of fuel.

Reporter: Does the adjustment of the structure mean that we must eliminate some backward production capacity?

Fan Rende: Eliminating existing backward production capacity depends on corporate self-discipline, and more through market adjustment. In the near future, China will issue the "Tire Industry Access Requirements" to raise the barriers to entry. After the implementation of the policy, it will be able to play a role in adjusting the structure. This policy mainly supports some high-end tire products, such as fuel-saving tires, smart tires and so on. [next]

Reporter: In addition to the access conditions, what policies will be introduced this year?

Fan Rende: The Association will engage in an industry policy this year, not only tires but also other rubber products. The document specifies the technical route, technological equipment, energy conservation, consumption reduction, and circular economy. Drafts have now solicited opinions and continue to solicit opinions.

Trade protection is intensified, and export stability is a prolonged battle

Reporter: On the export side, will the situation worsen this year? What should companies do?

Fan Rende: I think this is the case. The impact of the tire protection program last year was limited, but it will be reflected in this year. The impact on last year is less than 10 million units, and the impact on this year can reach 30 million units. Therefore, China cannot rely too much on the US market, nor can it rely too much on a few countries, and it should appropriately increase domestic demand and reduce the proportion of exports. According to our statistics, the proportion of exports in 2009 has been reduced from 46% in 2008 to 40%, and the proportion of adjusted exports has achieved initial results.

Reporter: If exports turn to China, will it increase domestic market competition?

Fan Rende: Of course, it cannot be exported. In order to maintain a steady and rapid development of tires, China's tires must be stable, because the proportion of exports in the past is relatively large, and it is impossible to lower them all at once, but export resistance is increasing. Now the United States, the European Union, India and other countries are all anti-dumping, and there are more and more anti-dumping in the world. The international market has increasingly high trade barriers, technical barriers, environmental protection barriers, and standard barriers against China.

Originally, our industry suggested increasing export tax rebates. China should fundamentally carry out a reform on export tax rebates. The export tax rebate gives foreign countries anti-dumping, and thinks that your government subsidizes the company. In fact, export tariffs are not collected by other countries. Why do you have to retreat after you've collected it? Do you not finish it?

From the perspective of enterprises, they should persist in making preparations for a protracted war. Starting from adjusting the structure and producing more environmentally friendly, more energy-efficient, and more excellent products to compete, you cannot buy Chinese products. Only in this way is the ultimate way out.

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