From January to April 2013, Shandong exported 54.25 million tires.

According to statistics from Jinan Customs, in the first four months of this year, Shandong ports exported 54.25 million tires, a 9.3% increase year-on-year (the same below); valued at US\$2.63 billion, a 1% decrease; the average export price was US\$48.5 per tire, a 9.4% decrease.

I. Main characteristics of tire exports from Shandong ports in the first four months

(1) Significant drop in export volume in April, and export average price stabilized at a low level. From January to March this year, the monthly export volume of tires from Shandong ports all showed double-digit growth. In March, exports reached 16.08 million, a historical high. In April, the monthly export volume dropped significantly to 13.79 million, a decrease of 0.9% year-on-year and 14.3% month-on-month, marking the first year-on-year decrease in monthly export volume since March 2011. During the same period, the monthly average export price ended six consecutive months of month-on-month decline in March this year, stabilizing at a low level in April. The average export price in April was US\$50 per tire, a year-on-year decrease of 5.7% and a month-on-month decrease of 0.4%.

(2) Processing trade accounts for over 80% of exports. In the first four months, Shandong ports exported 44.29 million tires through processing trade, an increase of 15%, accounting for 81.6% of the total tire exports from Shandong ports during the same period (the same below). During the same period, 8.934 million tires were exported through general trade, a decrease of 13.6%.

(3) The United States, the European Union, Latin America, and Africa are the main export markets, with a surge in exports to the United States. In the first four months, Shandong ports exported 10.28 million tires to the United States, an increase of 40.5%; 9.092 million tires to the European Union, an increase of 11%; 8.277 million tires to Latin America, a decrease of 3.3%; 8.241 million tires to Africa, an increase of 5.6%; the total exports to these four regions accounted for 66.1% of the total exports. During the same period, 6.101 million tires were exported to the Middle East (17 countries), a decrease of 14%; and 4.995 million tires were exported to ASEAN, an increase of 30.1%.

(4) Private enterprises account for nearly 70% of exports. In the first four months, private enterprises in Shandong ports exported 37.52 million tires, an increase of 13.4%, accounting for 69.2% of the total exports. During the same period, foreign-invested enterprises exported 12.07 million tires, a decrease of 2.1%; and state-owned enterprises exported 4.662 million tires, an increase of 10%.

(5) Passenger car tires are the main export product. In the first four months, Shandong ports exported 29.04 million passenger car tires, an increase of 16.2%, accounting for 53.5% of the total exports. During the same period, 10.91 million bus or truck tires were exported, an increase of 11.6%; 6.609 million other tires for construction and handling vehicles with rims ≤61cm were exported, an increase of 6.6%; and 5.189 million motorcycle tires were exported, an increase of 18.1%.

II. Main reasons for the simultaneous decline in volume and price of tire exports from Shandong ports in April

(1) Decline in raw material prices led to lower tire export prices. The continuous rise in rubber prices for many years has greatly stimulated the production enthusiasm of rubber farmers. The main producing areas of nine countries, represented by Malaysia, have gradually recovered from the impact of the disastrous weather on natural rubber production in 2005, and production has shown a recovery. During the 12th Five-Year Plan period, there are dozens of synthetic rubber investment projects under construction and planned in China, with a total annual capacity of over 3.5 million tons. In 2015, China's total capacity of synthetic rubber facilities may reach over 6.4 million tons; it is estimated that the domestic demand for synthetic rubber will be 4.695 million tons by 2015, and overcapacity will be inevitable. As of April 15, the rubber inventory in Qingdao bonded area was 366,900 tons, an increase of 8,300 tons compared with March 29, including 208,800 tons of natural rubber and 158,100 tons of synthetic and compound rubber. The continuous increase in inventory means that the demand in the spot rubber market remains weak. In mid-April, the main 1309 contract of Shanghai rubber fell below the low point of 20,990 yuan/ton last year, and closed at only 19,120 yuan/ton on May 2. In addition, with the reduction of import tariffs on natural rubber in 2013, the import cost of enterprises has been further reduced. The significant drop in raw material prices has directly led to a reduction in tire sales prices.

(2) Sluggish European car market, growing wait-and-see atmosphere, and the end of the concentrated delivery period have jointly suppressed tire demand. Data released by the European Automobile Manufacturers' Association shows that in March 2013, EU car sales were 1.307 million units, a year-on-year decrease of 10.2%; and first-quarter sales were 2.989 million units, a year-on-year decrease of 9.8%, marking a continuous 18-month year-on-year decline. The European replacement tire market also experienced an overall decline in the first quarter, with sales of various types of tires falling to varying degrees compared with the same period last year, including a 12% decrease in passenger car tires, a 13% decrease in motorcycle tires, and a 1% decrease in truck tires. On the other hand, affected by the significant drop in rubber prices, the wait-and-see attitude of downstream tire demand customers has become stronger, and the willingness to lower prices is strong, resulting in a significant reduction in tire orders, mainly small orders, and an increase in the number of customers delaying delivery. In addition, due to the concentrated start of work and delivery period after the Spring Festival in March, it has to some extent led to a surge in exports in March and caused greater pressure on further increases in April. These factors have jointly suppressed the continued increase in tire exports.

(3) Frequent trade barriers and protectionism hinder China's tire exports. The EU tire label regulation came into effect on November 1, 2012, requiring tires sold in the EU to be labeled with their fuel efficiency, wet grip, and road noise levels. This regulation has put higher demands on the production technology, inspection standards, and testing methods of Chinese tires exported to Europe. In addition, the United States, Brazil, Thailand, Colombia, and Mexico have also launched anti-dumping investigations into Chinese tire products. On September 4, 2012, the Brazilian Ministry of Foreign Trade decided to increase the import tariff on bicycle and automobile tires from 16% to 25% for one year to encourage the production of similar products domestically. Frequent trade barriers and protectionism have hindered China's tire exports.

III. Current issues of concern and relevant suggestions

(1) Structural overcapacity in the tire industry, insufficient product competitiveness, but the increase in industry profits brought about by the decline in rubber prices may accelerate transformation and upgrading. In recent years, China's tire production and export volume have grown rapidly, and its global market share has increased year by year. However, domestic tire companies are still following the path of high volume and low profit, relying on quantity to win. The homogeneity of China's tire industry is quite serious. The simple pursuit of quantity growth and simple replication of production capacity has resulted in low product technology content and added value, and rapid expansion of low-end capacity, while high-end tires are in short supply. In order to seize the market, various enterprises continue to increase their promotional efforts, leading to intensified vicious competition in tire exports, continuously declining prices, and squeezed profit margins, accompanied by an increased risk of suffering from foreign market trade protection. Accelerating entry into the high-end tire market has become the future development direction of the domestic tire industry, and the decline in rubber prices will bring benefits to the industry's transformation and upgrading. At the beginning of 2011, the price of natural rubber in China was around 43,000 yuan/ton, and in April this year it has fallen to around 20,000 yuan/ton, a drop of more than 50%. Because rubber prices account for a large proportion of tire costs, the decline in rubber prices has significantly increased the net profit of the tire industry. In 2012, China's tire industry achieved a profit of 27.5 billion yuan, a year-on-year increase of 43.7%.

(2) Foreign brands are accelerating their expansion, and local tire enterprises are facing challenges. In recent years, with the rapid development of China's automobile industry, China has become the fastest-growing tire market in the world, with its market size accounting for about 10% of the global tire market. Therefore, a new round of expansion by tire enterprises from developed countries has emerged in China. For example, Michelin in Shenyang, Toyo in Zhangjiagang, Sumitomo in Changsha, Bridgestone in Huizhou, and Volkswagen in Hefei have built new factories or expanded production. Since 1993, many key enterprises in the domestic tire industry with an annual output of over one million tires have been successively acquired and controlled by large multinational tire companies. Currently, Michelin's factories in Shanghai and Shenyang have a combined annual production capacity of 8 million tires, and Michelin China's total annual capacity is expected to approach 20 million tires in 2015. Pirelli plans to double the capacity of its Yanzhou factory in Shandong by the end of 2014, achieving an annual output of 10 million tires. It is predicted that foreign tire brands have already occupied 70% of the Chinese tire market. While foreign tire enterprises are seizing the high-end market, they are also increasing the production of ordinary and even low-end tire products in China, further exacerbating the overcapacity situation in the domestic tire industry and causing more severe impact and pressure on local tire enterprises.

Therefore, it is recommended: First, strengthen support for local tire enterprises, encourage technological innovation among local tire enterprises, improve tire production raw materials and formulas, enhance product environmental performance and quality, strengthen brand awareness, and strive to build internationally renowned brands; Second, closely monitor the price of natural rubber and the changes in quantity and price of tires exported to Europe and the US. While further expanding the initiative in upstream raw material prices, actively regulate tire export order, guide enterprises to grasp the export pace, and prevent the rise or further aggravation of trade protectionism; Third, seize the important opportunity for the transformation and upgrading of China's tire industry in a timely manner, promote structural adjustments, strictly control entry barriers, implement a low-carbon economic strategy, promote the industrialization of green tires, and achieve a transformation from factor-intensive to technology-driven.