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CHINA
Fujian Xiamen Quanshi Tong: Abundance of New Tyres Skew
Profit Margins in Retreading Sector
around 20 tonnes of rubber per month and catering to clients within a 100km radius of Xiamen. It operates the plant on one 18 tyre chamber, leaving another idle. “We have two chambers, but since the production dropped we are currently only using the single chamber,” he informed. Despite the slowdown, the company still maintains volumes of 2,500 tyres, retreading truck, bus and trailer tyres. “Our production is down by 30 per cent,” Yang claimed.
The huge production volume of new tyres has had a major effect
on economic calculations, and it is a wonder how many retreading companies are able to operate. According to Yang, profit margins have been skewed so much that profits have been reduced to no more than a few RMBs. “We are making anything between RMB 50 – 100 in selling new tyres, about RMB 50 on retreaded tyre and on small forklift tyres only RMB 20,” Yang stated.
Yang Jian Fa of Fujian Xiamen Quanshi Tong Trading Co Ltd
It has been confirmed from the slowdown in the Chinese retreading industry that infrastructural development activity is not moving at the pace as it used to. Growth in the Chinese economy has peaked at an annual growth rate of 7.7 per cent, a far cry from the sizzling double-digit growth that has brought prosperity to millions of Chinese. The slowdown may further deepen in 2014 as China will soon be embracing a new growth model of sustainable and high quality development. “The economic situation is not so good as it used to be as development activities have slowed down in the last few years,” said Yang Jian Fa of Fujian Xiamen Quanshi Tong Trading Co Ltd. “Tyre consumption has also dropped in the last year with retail sales from our store also slowing,” he added.
Commenting on the dropping fortunes of the retreading industry, Yang said, “Nobody will come to save the retreading industry as it is still merely a fraction of the new tyre industry.” Yang’s view is typical of Chinese retreaders, who, by and large, do not expect any kind of support from the authorities.
Retreading companies are adopting various survival tactics to remain in the business in the hope that the situation may bounce back in the future, even if not in the short term. “We know that our sales are dropping, but we are making efforts to consolidate the volumes by remaining viable. We have widened our capabilities and are retreading both bias and radial tyres besides selling new tyres,” Yang stated. Xiamen is an industrial area and many companies use only nylon tyres while others retread only radials.
Fujian Xiamen Quanshi Tong Trading Co Ltd is a Jianxin Rubber client, buying