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China tire demand to triple global growth

Updated: 2010-03-15 15:07
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Tire sales growth in China, the world's largest rubber consumer, will be three times the global rate in coming years as car ownership increases, Sumitomo Rubber Industries Ltd said.

Sales will grow in China by about 10 percent a year from almost 150 million tires in 2009, making it a possible choice for the company's next overseas plant, President Tetsuji Mino said in an interview. Global demand is expected to increase by 3 percent a year, he added. Sumitomo Rubber is Japan's second-biggest tire maker after Bridgestone Corp.

China overtook the US as the world's largest auto market last year as the government's stimulus policies boosted sales by more than 40 percent. Surging car demand helped increase consumption of natural rubber used to make tires, doubling the price of the commodity in 2009.

"We are sure that China is the most promising market," Mino said in a March 12 interview in Tokyo. "Car ownership is spreading from wealthy people to ordinary consumers."

Chinese motorists replaced about 100 million tires last year, representing 11 percent of global sales, Mino said. New vehicles would have needed as many as 50 million.

While sales of new cars may slow if China raises interest rates, demand for replacement tires will remain strong, regardless of government policy, Mino said.

The consumer price index, a main guage of inflation in China, reached a 16-month high last month. Rising industrial output and higher than forecast new loan growth is adding to the case for the government to pare back stimulus measures.

Growth plan

Sumitomo Rubber has seven tire plants, including one each in China, Indonesia and Thailand. The company represents as much as 6 percent of the global tire market, the sixth-largest share, and plans to sell 86.3 million units this year under a plan to boost sales 6 percent annually through 2012, Mino said.

A declining and aging population in Japan means that growth will have to come from international sales and production.

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Tire makers take it on the chin

Overseas sales will represent 65 percent of group sales by 2015, from 60 percent now and offshore production will need to reach 50 percent as early as 2012, from 40 percent, he said.

While China is a strong candidate for the company's next plant, India, Brazil and Russia will also be considered, he said.

Rubber prices on the Tokyo Commodity Exchange, the global benchmark, have advanced 3.7 percent this year as Chinese growth offset weakness in the US and Europe. China's passenger-car sales in February rose 55 percent from a year earlier as consumers responded to extended economic stimulus measures.

"Prices have stayed around a historically high level," Mino said. "I personally don't expect the current level will be sustained given market fundamentals."  

Natural rubber output from the leading suppliers during the low-production period will improve this year, boosting exports, the Association of Natural Rubber Producing Countries said in its February report. Member nations account for 94 percent of global production.