“Tiremakers did see a recovery from the end of February and by the start of March it was back to full capacity,” said Shen Jinrong, chairman of Hangzhou Zhongce Rubber Co. Ltd., China’s second-largest tiremaker. “But it remains uncertain how long this will be sustained.”
Chinese vehicle sales surged 25% in February, the first gain in four months, after the government cut taxes on some models. Tires account for 60% to 70% of rubber products made in China, Fan Rende, chairman of the China Rubber Industry Association, said Mar. 17.
“They seemed to have used up inventories and tire manufacturers in China are raising production to 80% or 90% of capacity, so there’s been demand coming on in recent months,” Jason Tan, head of sales at Von Bundit Ltd., Thailand’s biggest rubber exporter, said. “They are buying aggressively”
Sales in China’s automobile market, the world’s biggest after surpassing the U.S. in January, jumped to 827,600 vehicles last month after a retail tax on small cars was halved. The government is now giving out 5 billion yuan ($732 million) in subsidies to boost auto sales in rural areas.
Natural rubber has slumped 50% in the past year as the global recession slashed tire demand. Europe’s car market shrank 7.8% in 2008, while U.S. sales contracted 18% to a 16-year low. Rubber for August delivery gained 0.6% to 141.8 yen a kilogram ($1,482 a ton) on the Tokyo Commodity Exchange today.
“The Chinese rubber demand outlook is uncertain because we have to wait and see if the positive factors in the economy will overwhelm the negative ones, or vice versa,” Shen said in an interview at a conference in Guangzhou today.
The government is rolling out a 4 trillion yuan package, including spending on roads, power grids and housing, to boost the economy, which grew at its weakest pace in seven years in the fourth quarter. China’s Premier Wen Jiabao said this month the nation’s 8% growth target was within reach.
Consumption of natural rubber in China, the world’s third- largest economy, may expand by 4.7% to 2.65 million tons this year from 2.53 million tons last year, the China Rubber Industry Association’s Fan said this week. That’s slower than the 7.7% growth in 2008.
China’s demand for synthetic rubber will be firm in 2009 as consumption of the natural rubber rival falls by 4% to 5% worldwide, James McGraw, managing director of the International Institute of Synthetic Rubber Producers, said.
Also bolstering demand, China’s State Reserve Bureau may buy as much as 80,000 tons of natural rubber from the domestic market to boost prices, Fan had said. (Tire Review/Akron)
