Tire: Profit shrinks and export growth falls

In the first half of 2010, China’s tire exports grew rapidly, with a total of 86.67 million automotive tires exported, an increase of 30% year-on-year; export delivery value was US$3.968 billion, a year-on-year increase of 37.8%. Among them, 44.187 million are exported to Europe and the United States, accounting for 51% of the export share. How will the RMB exchange reform initiated in June affect the trend of tire exports in the second half of the year? Will the impact of the depreciation of the Euro on the export of tires in China be aggravated? The reporter interviewed some people in the industry for this purpose. The industry believes that, overall, although the cancellation of export tax rebates does not involve rubber tires, but exchange rate changes will certainly affect the efficiency of tire companies, the second half of the tire growth rate will decline.

“The fluctuation of RMB exchange rate will surely affect the profitability of tire companies, but the impact is so great. At present, it is not good. Because it is volatile and slowly rising, it is not very good for specific calculations.” Zou Yongzhi, General Manager of Guangzhou Huanan Rubber Tyre Co., Ltd. Say. Cai Weimin, secretary-general of the China Rubber Industry Association’s tire division, said that from static data analysis, it is initially estimated that if the RMB appreciates by 2% to 5%, tire exports will have no profit. According to the statistics of China Rubber Association’s tire branch, the profit of 43 major tire companies fell by 9.4% in the first half of the year, and in particular, the profit in May decreased by 22.7%.

Shen Jinrong, chairman of Hangzhou Zhongce Rubber Co., Ltd., said that the appreciation of the renminbi will definitely increase the overall cost of tires, but at the same time the cost of importing raw materials will also drop. For example, more than 75% of China's natural rubber relies on imports, and the proportion of imported synthetic rubber is also above 40%. The decline in import costs can partly offset the increase in export costs, which can at least offset 1/3, and good companies can reach 50%. He believes that companies should not just stare at changes in the exchange rate of the renminbi against the US dollar and the euro, but should also pay attention to the exchange rate changes between the renminbi and the currencies of India, Vietnam, South Korea, etc. Because China’s competitiveness is close to those countries, they can become our country. An alternative country for tire exports. “Compared with European and American countries, Chinese tires have obvious advantages in terms of cost performance. This gap cannot be eliminated by several points of appreciation of the renminbi, so we should pay more attention to competition with similar countries. Although we also have tires exported to these countries, But the amount is not as large as in Europe and the United States."

It is understood that the depreciation of the euro has also greatly affected the benefits of tire exporters, especially those that settled in euros. There is basically no profit, and companies respond positively to this. The reporter learned that some companies raised their prices to Europe in the first half of the year and offset the impact of a part of the depreciation of the euro.

Affected by the United States tire special security case, in the first half of the year, China exported 15.142 million US car tires, a year-on-year decrease of 24%; and the export delivery value was US$477 million, a year-on-year decrease of 24.6%. However, it is worth noting that exports to the United States in May and June have greatly increased. Among them, the exports in May were 2.754 million, and the export delivery value was 90.769 million US dollars, an increase of 9.9% and 12.5% ​​from the previous period; the export volume was 3.136 million in June, and the export delivery value was 103 million US dollars, a year-on-year increase of 13.9% and 13.5% respectively. It shows that the US market still has a large demand for Chinese tires.

“But whether this demand can continue until the end of the year is not easy to say. Although exports to the United States have increased in May-June, corporate profits are still declining. Now that US dealers are in inventory, they are waiting and watching in the past two months. 7 The quantity of orders in August will be greatly reduced. Now the international economic situation is very complicated and unpredictable," said Zou Yongzhi. According to Tan Yukun, deputy secretary-general of the China Rubber Association’s tire division, tariffs for special safeguards will fall by 5 percentage points in September, which may be one of the reasons for the reduction of orders from July to August.

It is understood that the United States is still the major export market for heavy-duty tires in China. From January to June, China exported 5.552 million heavy loads to the United States, an increase of 31.6% year-on-year; export delivery value was 372 million US dollars, an increase of 44.2% year-on-year. Among them, 1.175 million were exported in June, an increase of 56.5% year-on-year, and a year-on-year increase of 10.4%. The value of export delivery was 782.362 million US dollars, a year-on-year increase of 68.8% and a year-on-year increase of 12%.

Shen Jinrong believes that the decline in the number of tires exported to Europe in June was related to the depreciation of the euro and also related to the severe economic environment in Europe. “All orders before May, affected by the European debt crisis, the consumption growth is expected to be greatly reduced, resulting in a substantial decline in orders.” He said that in the second half of the tire exports can not be significantly higher than the same period last year, the international market will be closed inventory status, Demand will stabilize.

Fan Rende, head of the China National Rubber Association, believes that the European debt crisis has at least influenced the development of the world economy. However, the impact of the future is not great, and it is difficult to predict now. If the debt crisis is only a small country like Greece, it will have little impact; if it spreads across Europe, the impact will be great.

Cai Weimin stated that from a global point of view, major economies face huge fiscal deficits and public debt problems. They will be forced to implement fiscal austerity, and the world economy will experience a slowdown. Under the weakening external demand, China’s tire export growth rate will increase. Appeared to fall back. He also reminded enterprises that they should promptly adjust the structure of export products, export high value-added tires, and improve the management level and settlement skills of all aspects of export trade.

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