As per the latest updates from Association of Natural Rubber Producing Countries, prominent problems in Chinese tyre industry are the substantial growth of cost and the decline of profit growth rate. Firstly, the prices of raw materials see considerable growth. In April 2010, the price of natural rubber reached about 25,900 CNY/ton, rising by over 100% YOY. Secondly, the expenses on water, electricity and gas rise continuously. Thirdly, the labor cost is increasing significantly.
According to the investigation of China Research and Intelligence, transnational enterprises adjusted their tyre prices successively since 2009Q4 and the average price growth rate is over 10%. In May 2010, another group of transnational enterprises declared to raise the tyre prices by 5%-8%.
Chinese tyre enterprises also increased the domestic sales price and export price of tyres at the end of 2009 and the beginning of 2010, but the growth rate is only 3%-5%. On the whole, tyre price increase of domestic enterprises is in slow progress.
Presently, Chinese tyre industry is confronted with prominent product structural inconsistency, severe homogeneity, inadequate production capacity for new products (e.g. environmentally-friendly & safety tyres) and blind expansion of low-end products. Therefore, production capacity expansion and low-level redundant construction have to be prevented.
Furthermore, the international trade conflict will be more frequent in 2010, so Chinese tyre export situation is still gloomy. The high special safeguard tariff of 35% by USA will affect China's tyre export to USA severely.
China has promised to reduce the carbon dioxide emission per unit GDP by 40%-45% in 2020 compared with that in 2005. It is predicted that many expenses will be increased. There will be a huge cost for carbon emission reduction in China. Besides, the pressure for CNY appreciation is growing. Since 2005, CNY has appreciated by near 20%.
According to investigation, when CNY appreciates by 1%, the export profit rate of tyre will drop by 1%. The average profit rate of tyre export is only 3%-5%. Moreover, China will keep the macroeconomic policy continuous and stable in 2010. The government will continue to implement the proactive fiscal policy and moderately easy monetary policy.
The national urbanization development will continue to promote the development of highway, automobile and real estate industries. The auto production is expected to reach 15.50 million in 2010 with the growth rate of 15% YOY. The auto reserving volume will exceed 80 million. Thus, the tyre demand in Chinese market will be further enlarged. All these will support the development of the tyre industry.
(indiainfoline.com)
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