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Slowdown ahead for China rubber

Slowdown ahead for China rubber2019.09.16

Revenue generated by China's rubber industry was essentially unchanged last year versus 2017, at $105 billion, according to China's National Bureau of Statistics. The value of exports rose 4.4% to $23 billion.

The number of companies in China's sizable rubber sector, including tire makers, fell by 79 to 3,565 in 2018, following a drop of 324 companies in 2017.

Total profits generated by the industry rose 2.1% to $4.6 billion.

"It seems that some companies' performance is picking up but it's only because there is market space to fill upon the shutdowns," China Rubber Industry Association (CRIA) Secretary General Xu Wenying said at the China Rubber Conference in Guangzhou earlier this year.

The industry association's estimate for total assets of "sizable" companies' showed a decline of 1.4% to $120 billion last year. Within this estimation, tire makers' assets fell 6% to $72 billion.

CRIA also surveyed the 2017 and 2018 growth rates for 388 key companies in the sector.

The findings revealed sharp drops in production, sales and exports, Mr. Xu said, who went on to comment: "The jump in 2018 profit growth-rate only means we had a really bad year in 2017."

Monthly figures suggest "there is a strong positive correlation between growth rates for production value and export delivery value," the CRIA secretary general added.

In a segment breakdown of the 388 key companies, carbon black showed the most robust growth in terms of revenues and exports, while rubber footwear recorded negative growth for both.

Based on data from the key companies, in 2018 China's overall rubber sector recorded a 5.4% profit margin; the tire segment's profit margin of 3.1% was lower than the overall sector's in all three years.

"Investors need to be prudent with new tire projects," Mr. Xu said, citing factors such as international trade conflicts, rising U.S. dollar financing costs, the slip in domestic passenger car sales — the first time in decades — as well as Brexit and other uncertainties as reasons for the slowdown. 

Source: ANRPC

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