Raw material price increases affect every part of the tyre production and distribution chain. At the moment all the new tyre manufacturers (from the largest to the smallest) are feeling the raw materials pinch, which has been reflected in a run of less profitable financial reports. Even the Chinese manufacturers that were able to offer the “economic option” for so long are being forced to restructure their prices. Prior to this the low price of new Chinese made truck and bus radials had been hindering sales of quality retreads, so now that the price differential appears to swinging back against the Far Eastern budget producers, will this provide the opportunity for a resurgence in retread sales?
Take Qingdao, Shandong province-based Aufine Group Co Ltd. In August Tyres & Accessories received notification that the company was bringing in a second “unfortunate” price increase in three months, brought on by the “not small” (23 per cent) increase in Aufine’s natural rubber costs. The fact that the Chinese government clamped down on production in regions adjacent to Qingdao during the last quarter has also affected the distribution of these products. Furthermore, in addition to pressures mentioned above, the supply of Chinese tyres is also described as “inconsistent” since the pound’s value has fallen against the Euro. As a result Chinese manufacturers are increasingly ‘cherry-picking’ sales in the most lucrative international markets.
While much has been made about the enormous potential of the emerging Chinese tyre market, the opportunities go further than this alone. For every tyre that is produced and used in the People’s Republic there is a potential money-making opportunity for the retreading and collection aspects of the tyre business.
It is not overstating the situation to say there is huge potential for retreading in China. Currently around 265 million tyres are produced in China each year, across all segments. At the same time the domestic market’s 3 million vehicles currently demand 130 million tyres annually, according to a Hong Kong Trade Development Council report.