Chinese truck tire manufacturers are reducing capacity utilization
Chinese manufacturers of truck tires are reducing their production capacity due to a number of factors, such as the slowdown in investment growth in infrastructure projects in the country, a decline in production volumes in the mining industry, as well as weak demand from carriers and low profitability, Sohu reports, adding that demand is decreasing both in the domestic Chinese market and abroad.
Since the inventory level remains high, there is a risk of overproduction, and a representative of a tire company from Shandong province said that two plants in the region have announced a halt in production, while other enterprises are reducing product output. In mid-August, the capacity utilization rate of truck tire manufacturers in the province was 52.26%, down 4.17 percentage points from the previous week, while the decline from the same period last year was 10.89 percentage points. According to the publication, in August, 17 plants in the region planned to suspend production for an average of nine days, resulting in a reduction in tire production of 476,000 units.
In mid-August, the capacity utilization rate of Chinese passenger tire manufacturers was 79.64%, which is 0.53 percentage points lower than in July, but 1.2 percentage points higher than in the same period last year. In the truck tire segment, the capacity utilization rate was 59.33% (-0.13 and -4.03 percentage points compared to July and last year, respectively). At the same time, the average inventory turnover period for passenger tire manufacturers was 36.95 days (+0.79 and -0.54 days), and for companies producing truck tires, it was 43.03 days (-0.35 and +0.78 days).
The indicators of the Chinese truck market are also not the most positive, and according to the China Association of Automobile Manufacturers (CAAM), in June 2024, sales of heavy-duty trucks in the country amounted to 71,363 units, down 17.84% compared to June last year. This is the second time this year that a double-digit decline has been recorded, with a similar situation previously observed in February. In July, about 59,000 heavy-duty trucks were sold, which is 17% less than in June and 4% less than a year earlier.
Sohu notes that after a long period of rapid development, the Chinese truck tire market has entered a stage of stagnation and "prospects are not optimistic either in the secondary market or in the primary equipment segment", and export volumes have decreased due to anti-dumping duties and rapid growth in transportation costs. In addition, natural rubber prices have risen as production has been affected by rains in Southeast Asia. The cost of rubber for some positions has exceeded 16,000 yuan (2,200 dollars) per ton, which is the highest level in several years.
The Chinese truck tire market is one of the largest in the world, which has attracted many foreign companies that have invested in building plants in the country. At the same time, fierce competition from local players has led to the fact that global companies have begun to reduce the production of truck tires in China (for example, Bridgestone has completely stopped the production and sale of tires in this category in the country), and against the backdrop of weakening demand, competitive pressure on all manufacturers has intensified, and now the industry needs to find a way out of the current situation, Sohu concluded.
Photo: Sohu.