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Capacity Utilization of Chinese Tire Companies Starts to Decline

The capacity utilization of all-steel tire and bias-ply tire manufacturing started to decline since May.

An industry insider predicted from the phenomenon that entering June, the market demand in the downstream wouldn't be stronger and the capacity utilization of domestic tire producers would decline further.

Macroeconomy and Environment Policies Affect Capacity Utilization

Analysis went that the macroeconomic environment had been sluggish in domestic market, therefore the transport of engineering machineries and automotive logistics kept on dropping. The orders for tires in the downstream were affected accordingly.

In the meantime, the environment policies in some regions became stricter, frequent examinations over the environmental conditions of tire companies made those with less advanced technologies lessen capacity utilization.

Some industry insiders had predicted that the domestic tire market would warm up in the second quarter.

The predication was based on that in March and April, the capacity utilization of all-steel tire producers were above 70% on average, and that of semi-steel tire producers were over 75%.

Actual Tire Prices Drop

Industry insiders were optimistic about the tire market for this year at the annual conference held not long ago. Only Shen Jinrong, board chairman of Hangzhou Zhongce Rubber, said the recovery in China's tire market was an illusion.

In his point of view, the increase in capacity utilization of the domestic tire companies was not because of real market demand.

He even believed that China's tire companies would confront the greatest difficulty ever this year. Those remarks were reckoned as scaremongering by some.

The rubber prices grew for a while at the beginning of this year, but an obvious decline had been detected lately.

As a result, there was no such thing as a comprehensive tire price hike as expected by some.

Figures show that the volume of China's tire export inched up 0.7% year on year so far this year. But the export to the U.S. dropped 13%.

In addition, China's all-steel tire export will soon be impacted from the anti-dumping and anti-subsidy measures by the U.S.. Shen estimated that once America takes actions, the capacity utilization of China's all-steel tire producers will drop by 5% at least.

As the inventories of tire retailers mounted up, the delivery of some tire companies had been affected.