◎ Deng Yali, Chairman of China Rubber Industry Association 

2017 was generally a quite unusual year, during which politics, economy and international trade were all full of uncertainty and the economic operation of the industry was faced with both challenges and opportunities. In retrospect, the whole industry strived to maintain the stable economic progress of the industry after living through hardships, overcoming dif culties and conducting transformation and upgrading. Generally speaking, the industrial economy kept growing at a rate higher than last year.

I. Economic Operation of China’s Rubber Industry in 2017

According to statistics of the National Bureau of Statistics, in 2017, there were 3,644 enterprises above designated size in the rubber product industry nationwide, decreasing by 324; the income brought by major business was RMB 959.936 Billion Yuan, increasing (year on year, same below) by 8.21%; the total profit was RMB 53.55 Billion Yuan, increasing by 1.80%; xed-asset investment of RMB 53.55 Billion Yuan was finished, decreasing by 2.40%, among which the investment in tires was RMB 42.70 Billion Yuan, decreasing by 23.5%, the fourth year in a row; the assets totaled RMB 852.449 Billion Yuan, increasing by 8.62%. The total national trade amount of rubber product export increased by 4.94%; it accounted for 24.1% of the petrochemical industry nationwide, making it remain to be the largest export petrochemical industry despite 1.9 percentage points down.

According to the CRIA statistics for 407 key member companies, the major indicators for the economy in 2017 have the following characteristics:

1. Both Output and Income Increased

The industrial output value at the current price increased by 11.23%. Among 42 key rubber products in the statistics, the output value of 28 kinds achieved year-on-year growth, accounting for 66.67%. The output of products that were closely related to the consumer market, environmental protection, green manufacturing, infrastructure building and key projects of the state achieved a relatively fast growth.

In 2017, the sales income increased by 14.99%, which was 10.56 percentage points more than the increase of last year and 26.29 percentage points more than in 2015, reversing the downturn since 2012. Among the sectors included in the statistics, only rubber shoes saw a negative increase in sales income; the increase in rubber agents was lower than last year; cycle tires, hose belts, carbon black and comprehensive utilization of waste rubber reversed the decreasing trend last year.

The percentage of loss-making enterprises dropped by 4.35%, the loss amount increased by 52.18%, and the inventory (value) of nished products increased by 17.27%.

2. Export Volume and Prices Increased

According to statistics of the Association, the export delivery value of the industry in 2017 increased by 18.33%, 18.54 percentage points more than the increase of last year and 30.43 percentage points more than in 2015, reversing the downturn in export since 2012; the export rate (value) was 30.91%, increasing by 1.85 percentage points. Two sectors—hose belts and comprehensive utilization of waste rubber—saw negative growth; six sectors maintained a trend of increasing growth, including cycle tires, rubber products, latexes, rubber machinery moulds, rubber agents and framework materials.

3. Differentiation of Profits Was Uneven and the Prfits of Industrial Chain Inclined

In 2017, the output of home-made synthetic rubber increased by 3.97%, with the realized profit increasing by 48%; the output of carbon black increased by 6.23%, with the interests increasing by 400%; the prices of rubber agents rose by 20%~40%, and the highest increase was over 70%. Among downstream products, the profits of hose belts and products kept growing. Tires and cycle tires saw no increase in profit despite increase in production and income, with profits dropping by 49.56% and 35.10% respectively.

4. Rubber Consumption and Tire Output Reached a Record High

In 2017, the total rubber consumption in China was 10.10 million tons, including 5.40 million tons of natural rubber, which increased by 10.20%, and 4.50 million tons of synthetic rubber, which increased by 1.12%.

According to CRIA survey, the total tire output nationwide in 2017 increased by 7%, 0.9 percentage points lower than last year. Among which, radial tires grew by 8.5%; bias-ply tires fell by 11%; and the radial tire ratio was 93.8%. Among radial tires, all-steel tires grew by 8.2%; and semi-steel tires grew by 8.5%. The growth rate decreased by 1.8 and 1.1 percentage points respectively.

In terms of the tire export market, tire export increased in 2017 after decreasing for three years in a row. The weight of exported tires rose by 2.7%, and the export amount rose by 9.8%. Among which, the export volume of passenger car tires increased by 3.61%, and the average export price rose by 8.78%; the export volume of commercial vehicle tires increased by 1.73%, and the average export price rose by 10.73%.

In general, the prices of tires for export and domestic sale both increased to different degrees. But compared with the rise in costs, the price increase was still limited, which led to the constant decrease of industrial profits. The tire market is in an increasing severe situation where competition is getting even ercer. In particular, China’s tires are largely dependent on the foreign demand market. In recent years, the global tire industry has been developing at a faster speed. With trade protectionism rising, the pressure on export keeps increasing. The structural con icts in tire export remain outstanding. Products are mainly for the mid to low-end market, where competition is extremely erce.

II. Operational Characteristics of the Rubber Industry in 2017

The operational characteristics of the rubber industry in 2017 are shown in four aspects:

1. The Pace of Transformation and Upgrading Sped up

Firstly, breakthroughs were made in structural adjustment and part of outdated capacity was eliminated. According to incomplete statistics, 27 companies exited or were eliminated from the rubber industry, among which were ten tire factories; outdated capacity of 7.30 million bias-ply tires were eliminated; the capacity of ordinary radial tires were 18 million, among which are ten million all-steel tires and eight million semi-steel tires. In addition, over ten companies in a certain region of Shandong alone nished merging and reorganization, and others are underway.

The tire product structure were improved and upgraded. The output of tubeless all-steel tires across the industry roughly accounted for 45% of the total output. The output of high-performance semi-steel tires roughly accounted for 40% of the total output.

Secondly, environmental protection and treatment were put into practice, pushing forward green development. As supervision on environment protection keeps upgrading, companies in this industry have invested heavily in “softwares and hardwares” for environmental treatment and put the measures into practice, including energy performance contracting, centralized heating or coal-to-gas switch, carbon emission and VOC treatment, replacement by green raw materials, moving industrial parks, treatment of rubber re ning and sul de tail gas, choosing non-toxic and harmless raw materials to improve product formula, transformation and upgrading of manufacturing facilities, re ned management, etc., all of which effectively relieved the environmental protection pressure or reached the standard for emission reduction, advancing the process of green development in the industry to an extent.

Tire manufacturers were devoted to recycled use and development of waste tires. For instance, companies including Zhongce Rubber, Wanli Tire, Doublestar Group, Double Coin Tire and Aeolus all established companies for recycled use and development, which would be responsible for recycling of waste tires, environment-protecting development and research of waste rubber as well as renovation of used tires.

With the ongoing implementation of tire labeling system, 48 companies registered their information on the tire labeling data management platform of the Association. 111 tire labels were issued after veri cation. The Tire Grading Standard of CRIA was included in the 100 Demonstration Projects of Group Standard Application in 2017. The activity of “Green Tire Safety Week” was successfully held, leading the market and advancing product upgrading and green development.

Thirdly, with abundant achievements in technological innovation, the industrial transformation and upgrading further sped up. The rubber industry set up 22 state-level company technology centers, seven industrial technological centers and five signatory laboratories, which were making new progress in such aspects as new techniques, new technologies, new materials, construction of intelligent factories, R&D of new products. New equipment and new technologies were successfully developed, bringing “good news” to the upgrading and updating of products. These equipment and technologies included the dandelion rubber tires of Linglong Tire, the tires made from carbon nano tube materials of Fengyuan Tire, Sailun Jinyu adopted the new EVEC rubber materials to manufacture super-high performance green tires, the grapheme static-conducting tires developed by Sentury Company, General Science Technology applied Eucommia rubber to all-steel tread rubber that was super wear-resistant, Shenyang T-Rubber worked with a party concerned on applying Eucommia rubber to aircraft tires, the full electromagnetic induction-heating tire vertical compression molding vulcanization technology and equipment jointly developed by Triangle Tire and Beijing University of Chemical Technology, two-stage moulding machines used for motorbike radial tires, double-station spring turn-over moulding machines for electric bicycle (motorcycle) tires, bicycle tire plastic cement foam injection system double-air chamber three-layer capsule new efficient energy-conserving vulcanizing machines, nano carbon alloy coating materials used for tire demoulding, etc.

Fourthly, the integration of “informationization and industrialization” and intelligent manufacturing were steadily carried forward. The tire sector took the lead in the industry in term of the integration of “informationization and industrialization” and intelligent manufacturing. Intelligent factories of Hefei Wanli, Triangle Nanhai, Qingdao Doublestar, Qingdao Sentury (Thailand) and Double Coin (Thailand) were built and put into ef cient operation. With improvements made in such aspects as the uniformity of product quality, production efficiency and profit, energy consumption, environment-protecting emission and significantly reduced labor force, they built modernized factories that took the lead domestically or even globally in the tire industry. Six tire companies either obtained the pilot demonstration projects of intelligent manufacturing from the Ministry of Industry and Information Technology or became the pilot companies for the integration and implementation of “informationization and industrialization”. More companies put their focus on the technological transformation of old factories and new projects. Combining their own characteristics, they placed emphasis on systems of building intelligent logistics transportation, stereoscopic warehouse, tire manufacturing, tire sorting, power supply, etc. They enhanced their competitiveness by means of applying automated equipment including big data, Internet, MES, APS, WMS, ERP technologies and robots.

Fifthly, the international development of “going global” was in steady progress, and the effects of the global operation of companies were remarkable, which brought high-quality capacity of machinery equipment and raw materials into the international market. The overseas factories of Sailun, Linglong, Zhongce and Sentury had great development momentum with two-digit capacities released. The Thailand factory of Double Coin put products off the assembly line in 2017. In addition, many other companies announced that they might plan to build factories in the U.S., Southeast Asia as well as Central and Eastern Europe. With R&D and manufacturing bases in ten countries worldwide, Zhuzhou Times New Material and Anhui Zhongding became innovative and informationized global high-tech manufacturers with a sales size of over RMB Ten Billion Yuan.

Sixthly, the brand strategy was prominent. These years, companies in this industry have invested heavily in improving quality and spreading brands. Advertising and promoting self-owned brands through various methods, boosting a company with its brand became a consensus.

At the “International Exhibition on Tire and Aftermarket 2017”, the bosses of twelve companies including Zhongce, Linglong, Sailun, Doublestar, AEOLUS, Prinx Chengshan, Guizhou, Wanli, General Science Technology, Sentury, Yanchang and Fengyuan appeared on the Society and Law Channel of CCTV together. They endorsed the tire brands of their own company, representing the theme of “Made in China and Power of China”. Meanwhile, they also demonstrated advanced technologies and products of key tire companies and expanded the in uence of self-owned brand tires in markets both at home and abroad.

III. Analysis of the Opportunities, Challenges and Trend of the Industry in 2018

1. Challenges Facing the Industry

In 2018, the rubber industry will face such challenges as deepening supervision over environmental protection, uncertainty in the prices of raw materials, increasing costs and trade conflicts. On one hand, the rubber price rose before falling last year, uctuating signi cantly. It rose to the peak in the rst quarter before falling sharply later. The companies were caught unprepared. Their normal goods stocking and production were severely affected. The tariff on natural rubber remains high, the import of synthetic rubber is limited, and the prices of rubber raw materials are fluctuating. The production of products including rubber agents, carbon black, framework materials is affected by environmental protection, which leads to their price rise and tight supply. As the costs for environmental protection, materials, labor, nancing, energy and logistics increase, the costs of the industry will keep rising. Because of the decrease in realized profits, the survival and development of companies in the industry are faced with unprecedented challenges. Some companies will be incapable of taking orders or even have to shut down under nancial and environmental protection pressure.

2. Opportunities for Development

Opportunities coexist with challenges. Over the past year, the rubber industry has achieved remarkable results in the work of relieving overcapacity, profit recovery, selecting the superior ones and eliminating the inferior ones. Relieving overcapacity helped keep companies running steadily in production and operation. Production and marketing targets of the industry picked up as a whole. Income recovery was most obvious in the industry providing supporting raw materials represented by rubber agents and carbon black. Some companies were shut down due to failing to reach the environmental protection standard. The capacity was thus reduced, causing rise in product prices across the board. Companies producing rubber products such as tires have achieved remarkable results in selecting the superior ones and eliminating the inferior ones. On one hand, under the circumstances where rubber prices were uctuating sharply, the prices of carbon black, agents and cord fabric kept rising, and supervision and inspection over environmental protection got stricter, part of companies that had weak strengths for development and failed in reaching standard gradually cut capacity or completely quitted, which gave more market room to advantageous companies (member companies for the most part). On the other hand, the general industrial economy was less encumbered with outdated capacities and zombie companies. The sales quantity and prices went up. The export of products maintained a momentum of steady growth. The production, marketing, export and profits of the industry basically continued the development trend of steady pick-up and gradual improvement since the latter half of last year and preliminarily exhibited a new form of industrial development, i.e. “strong-get-stronger”.

3. Anticipated Goals of the Rubber Industry

Based on macroeconomic development as well as the analysis and judgment of comprehensive factors including industrial production, price trend and structural adjustment and change, the rubber industry set primary anticipated goals in 2018 as follows:

It is anticipated that the total output of tires nationwide will increase by 3.5%, among which the output of radial tires will increase by 3.7% (2% increase in all-steel tires; 4.5% increase in semi-steel tires).

The production growth rate of motorcycle tires, conveyer belts, rubber shoes and condoms will equal that of last year or slightly decrease, while that of other rubber products, carbon black, agents and framework materials will be better than last year.

With costs as support, the prices will be relatively stable in the domestic market of rubber products such as tires, the prices of supporting materials will remain high, and the tasks of structural adjustment across the industry and resolving rising costs will be pretty tough.

For upstream and downstream industries to continue sound development, an operating mechanism for the balanced development, cooperation and win-win of the industrial chain must be further set up. Sharp uctuation in prices is harmful to market stability and the healthy development of the whole industry.

IV. Development Direction and Key Work

1. Adhere to innovation-driven development and further implement the strategies of “Made in China 2025” and building the country with a strong rubber industry

We must grasp the historical opportunities brought by the new round global technological revolution. In the elds of new materials, energy conservation and environmental protection, new technologies and new equipment, we must build industrial centers for technological innovation, conduct determination and appraisal of “key laboratories”, further build a batch of industrial platforms for innovation, highlight the orientation of collaboration, marketization, industrialization and sustainable development, and foster and guide reasonable allocation and gathering of resources for innovation, all in efforts to make innovation become the key factor and crucial support of the high-quality development of the industry.

2. Eliminate outdated capacity and optimize the industrial structure

Eliminating outdated capacity is an important measure for high-quality development. The structural overcapacity is the crux of excessive competition in the market. In 2018, vigorously eliminating low-end and inefficient capacity is an important focus of deepening the supply-side structural reform. Market-based and law-based measures will be taken at the same time. By strictly carrying out the standards and admittance thresholds in environmental protection, energy consumption, technologies, quality and safety, we will push outdated capacity out in accordance with laws and regulations, and put newly increased lowend capacity in strict control; we will encourage the merging and reorganization of advanced companies, eliminate outdated capacity and push forward the elimination of excessive capacity.

At present, there is an exact measuring standard for “outdated capacity”. We no longer judge it by the growth of gross value of production or advocate for size, but consider “output per unit” to be most important. What the profit per mu pursues are indicators such as average taxation per mu, added value per mu, labor productivity of all workers, added energy consumption per unit, added emission per unit, the percentage of R&D expenditure in main business, operation revenue per mu, etc.

3. Further advance green development

Further advancing green development is an inevitable requirement for high-quality development. In 2018, we must strengthen technological innovation, solve and popularize a batch of clean production technologies, energy-conserving and low-carbon technologies, waste water treatment technologies, comprehensive utilization and terminal treatment technologies; we must optimize green standards for the industry, nish the release of Technological Specifications for Appraisal of Green Design Products — Automobile Tire, build a long-term mechanism for green development, advance greenization of the industrial chain ranging from product design, production techniques, product distribution and recycled treatment and utilization, so as to achieve the transformation to the idea of green development throughout the whole process of cutting emission from sources, process control, terminal treatment and comprehensive utilization; we must constantly improve the tire labeling system and strengthen supervision and inspection.

4. Deepen the integration of “informationization and industrialization” and develop intelligent manufacturing

In recent years, the industry has highly valued and vigorously advanced the development of intelligent manufacturing. There has emerged a batch of intelligent production lines, workshops and factories. Advancing deeper integration of “informationization and industrialization” and developing intelligent manufacturing are effective methods for traditional industries to achieve transformation and upgrading. They are important measures to accelerate the transformation of development patterns and to push the industry toward mid to high-end development. They are also an inevitable choice to build a strong manufacturing country and create new competitive edge. We must make more efforts in carrying out technological transformation through upgrading of companies’ manufacturing facilities and improvement of the Internet, so as to drive the digital, networked and intelligent transformation and upgrading across the industry.

5. Put the “Belt and Road” initiative into practice and deepen international cooperation

Deepening international cooperation is an effective way toward high-quality development. We must put the “Belt and Road” initiative into further practice, “go global” to build industrial bases, deepen international cooperation in capacity, optimize global resource allocation and capacity layout, make use of both international and domestic markets and resources, highlight technologies, brands and markets, get more deeply and widely integrated into the global supply system, improve the ability of conducting global operation, and push China’s industries toward mid to high-end global value chain. We must further conduct foreign cooperation, constantly expand the range of cooperation and extend the depth of cooperation.

6. Improve quality, increase varieties and create brands

In the new round of development, the whole industry must put strengthening the country with quality and brand building in a more prominent place, stick to the direction of working primarily on improving supply quality and expedite the improvement of industrial quality. We must optimize the development of a technological guarantee system for quality inspection and testing; we must exert and enhance the functions and effects of working platforms such as industrial inspection and testing; we must improve the quality of raw materials; we must popularize advanced quality management methods and carry forward the craftsman spirit and the culture of excellent companies; we must further advance the constant and healthy development of activities concerning corporate integrity, brand promotion and quality credit, conduct merging, reorganization and integration, and bring in new technologies, new management and new patterns, so as to create vigor and vitality; we must focus our efforts on improving quality and increasing profit, accelerate the industrial optimization and upgrading, and facilitate quality improvement in the supply of the rubber industry.