2013 Shandong Province Rubber Industry Forecast

From the perspective of both international and domestic market conditions in the latter half of 2012, numerous factors influenced industry development, and uncertainties increased.

While the economies of the US and Europe experienced slow recovery, positive changes emerged, such as the EU establishing a unified financial regulatory agency; allowing rescue funds to directly purchase government bonds; and launching a €120 billion economic stimulus plan. These measures will have a positive impact on stabilizing financial markets and easing the debt crisis, a trend clearly beneficial for Chinese companies resuming export growth to Europe.

However, the EU tire labeling law implemented in November of last year increased technical barriers for Chinese tire exports to Europe, raising export costs and impacting export volume. The expiration of the US tire safeguard case without extension was favorable for Chinese tire exports; however, President Obama's economic policies following his re-election prioritized domestic job creation, encouraging large companies to shift from outward investment to creating jobs domestically. This policy has distinct protectionist characteristics. During Obama's term, the number of trade lawsuits filed against China doubled compared to his predecessor, including tariffs on Chinese tires, sanctions on the photovoltaic industry, investigations of ZTE and Huawei in the US, and the rejection of a Sany Group subsidiary's electricity project. It can be anticipated that Chinese product exports to the US will face increased resistance in the future. In short, various complex and interwoven factors have both positive and negative impacts on Shandong Province's tire exports, presenting both opportunities and challenges.

Domestically, with economic policy prioritizing steady growth, it is expected that the government will not solely rely on investment to stimulate the economy in 2013. From this perspective, this year will continue the proactive fiscal policy and prudent monetary policy of the latter half of last year without significant changes.

In the industry, China's rubber industry is reliant on both imports and exports; 80% of natural rubber is imported, and 40% of tires are exported. The natural rubber market experienced significant fluctuations in 2012, with a sharp decline in the first half of the year and a recovery after September. The stability of the natural rubber market is closely related to the stable development of China's rubber industry. According to the International Rubber Study Group (IRSG), global rubber consumption in 2012 is expected to reach 26.6 million tons, a 2.7% increase over the previous year (25.88 million tons); consumption in 2013 is projected at 27.6 million tons.

China's synthetic rubber production capacity has steadily increased in recent years, reaching 3.5 million tons in 2011. In 2012, numerous companies further expanded production capacity. While there is a trend of overcapacity in synthetic rubber, it has played a role in stabilizing rubber prices. Overall, rubber prices will fluctuate this year, but the likelihood of significant fluctuations is low. The automotive industry, which directly impacts the rubber industry, experienced stable growth in 2012 after several years of explosive growth, with a significant slowdown compared to the previous two years. It is expected that under the environment of stable growth, the automotive industry is unlikely to experience significant ups and downs in 2013.

Considering the above factors, the operating trend of Shandong's rubber industry in 2013 will likely continue the trajectory of the second half of last year, with steady growth in production and sales. A single-digit growth rate is highly probable, although the production and sales of certain products, such as bias tires, may decline.

Regarding the industry's main product, tires, the output of all-steel radial tires is expected to increase slightly; semi-steel radial tires are expected to maintain significant growth, with a projected year-on-year increase in the double digits. Assuming no major changes in the international economic situation, tire exports are expected to maintain double-digit growth.

(This report is compiled based on materials from the "2013 Rubber Market Summit Forum," authored by Zhang Hongmin, President of the Shandong Rubber Industry Association.)