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Chinese Tire Industry Faces Survival Test

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Wildly-rising caoutchouc prices have made it hard for China's tire industry to survive, and seven tire giants gathered Thursday to discuss needed countermeasures, Economic Information Daily reported Friday.

Deng Yali, vice-chairman of China Rubber Industry Association (CRIA), said that since October 2010, rubber prices rose uncontrollably and are driving production costs to a level where it causes some to experience a cashing-out instead of in. They (prices) have risen more than 80 percent throughout the whole of 2010, according to the report.

The enterprises lamented that profits were slashed 30 to 50 percent year-on-year, and the situation heads to worse in the first quarter of this year, with many already expecting losses.

And with distributors having enlarged inventories by more than 50 percent, tire producers –with buyers stomach-full – have to digest costs themselves, many of whom are planning on slashing production to a half.

The seven firms also stated that they would halt production for half a month during the Spring Festival Holiday.

Cai Weimin, secretary-general of a tire branch of CRIA, said that the industry now faces unprecedented difficulties and called for government interference. He also hopes the government can lower import taxes and urge rubber producers to seek for ways to normalize the situation to ensure a smooth development of the industry.

The world consumes about 9 million tons of rubber per year. China consumes about one third the amount.

( January 17, 2011)

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