The price of natural rubber in China is driving an increase in tire prices, International Finance News reported Monday.
The price of rubber is more than 40,000 yuan ($5,947.96) per ton, which is threatening profits of Chinese tire makers to the point where some may even go bankrupt, said Fan Rende, head of the China Rubber Industry Association. The profit rate in the rubber industry decreased to lower than 3 percent from 5 percent, he added.
Aside from a price jump of natural rubber, trade protection measures adopted by foreign countries against Chinese tire makers also threaten their survival. Fan said 80 percent of China's natural rubber consumption is from imports, so adding import tariffs on natural rubber is not reasonable. He thinks Chinese enterprises should seek solutions to fix the price of rubber.
China is the biggest producer and seller of tires, but the country's rubber industry is not strong, said Ma Lianxiang, president of Qingdao University of Science and Technology. Chinese enterprises lack technical innovation, so, he said, they hardly have the capability of negation.
Insiders said China's tire industry should adjust the structure of their products and add more value added to avoid low-level competition.
As a major producer of rubber, Shandong province is aiming to become the leader of China's rubber industry. Qingdao city of Shandong proposed the construction of "Rubber Valley" in their local plan for the 12th Five Year (2011-2015) period. The total area of the valley would cover approximately 3,000 mu (200 hectares). The project, which would require an investment of 10 billion yuan, is expected to be completed by 2015, according to the report.