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CHINESE TYRES
How Can European Retreading Face the Challenge of Chinese Tyres? By David Wilson
On the day I sat down to write this article, the number one news item in the UK media was the wrangling over the future of the UK steel industry and, in particular, the potential closure of the Tata Steel owned Port Talbot Steelworks in South Wales, which is said to be losing £1 million per day.
The main reason given for the uncompetitiveness of the Port Talbot plant was the dumping of cheap steel from China into the European market. In an ultra-free market approach, the EU has so far managed to impose penalties of only 13% on Chinese cold rolled steel compared to a whopping 267% by the US government in Washington. British prime minister David Cameron has so far paid lip service to the idea of saving the plant saying he will do ever ything he can to save the steel industry except nationalise it.
However, there are many who are suggesting that there is more at stake than at first meets the eye. Stephen Kinnock, the Labour MP for Aberavon, where the Port Talbot plant is located, recently travelled to Mumbai for talks with Tata, in an attempt to persuade the company to consider keeping the plant open. However, in a statement to the UK press, Kinnock said that the government had not offered support to the delegation and accused ministers of failing to take action to protect
British steel, which has been in decline as a result of Chinese dumping.
“We are rolling out the red carpet for Beijing,” he said, in a newspaper article, suggesting that Britain was pushing for China to get market economy status at the World Trade Organisation despite the fact that the vast majority of its steel industry was state-owned. He also described Britain as a “ringleader” in blocking European commission attempts to improve anti-dumping policies.
“They are in hock to China. Our commercial policy, our approach to trade and manufacturing, and our overall industrial strategy, is being dictated by Beijing, he said.”
In another article a Brussels official was quoted as saying; "The British are sacrificing an entire European industr y to say thank you to China for signing up to the nuclear power project at Hinkley Point, and pretending it is about free trade."
In a further article the same sentiment was echoed, suggesting the British government was so reliant on Chinese funding for projects such as Hinkley Point, that it did not want to annoy the Chinese by doing anything about their “dumping” of cheap steel. The article continued; “The government also argues that, even if it wanted to, it cannot use taxpayers’ money to save Port Talbot because of EU restrictions
on state aid; curious how the EU is apparently to blame. How is it possible therefore for Germany, France and Italy to have state involvement in so much of their manufacturing industries? Thousands of millions of pounds, were used without question to rescue banks from the mess they had created. Why then cannot smaller sums be used to rescue a heavy industry whose problems are not of its own making, which employs a large number of ordinary workers, and which is of strategic importance to the future of British manufacturing?”
The effect on long-standing industries that can be caused by dumping will be sadly familiar to the European retreading industry (and indeed to the retreading sector in many other parts of the world), which has seen floods of Chinese new tyres enter the market at prices which threaten to make truck tyre retreading unsustainable. The inference of the scenario in the steel industry is gloomy indeed. If the stakes are so high in other areas that governments are prepared to risk the future of an industry as fundamental as the steel industry, when one’s own government appears to be acting against you, then what chance does a small industry like the tyre retreading industry have?
In commenting on the situation in the UK steel industry The UK’s Daily Telegraph likened British
Chancellor George Osborne’s love affair with the Chinese to a “Faustian pact”. But let us not be fooled here. The Chinese tyre industry is suffering from massive overcapacity. Can you really blame the Chinese government for trying to protect its own industry by intervening to protect it? And can we really blame struggling companies using that support in order to exploit markets following strict free market ideologies where governments are willing to support their own struggling industries only reluctantly?
For many years the European retreading industry has felt like it has been banging its head against a brick wall with one hand tied behind its back. Faced with the spectre of increased legislative burdens, with one or two notable exceptions it has been repeatedly told that it will not be able to gain tax benefits because of its green credentials because that would be uncompetitive – and yet it is also told that cheap tyres from the Far East are not real competition – because new tyres and retreaded tyres have different commodity codes.
Now, however, the signs are that things are getting serious. With significant falls in the European retreading market over the past couple of years, it seems that there will have to be a sea change in attitude and approach if truck tyre retreading in Europe is not going to be reduced to a scale totally different to what it has been used to.
BIPAVER, the Federation of European Retreaders is certainly not immune to the situation and says it is preparing the necessary measures to counter the threat posed by the dumping of cheap Chinese tyres, but is hesitant to go into any more detail at this stage for fear of jeopardising any initiative. No doubt things will become clearer during the upcoming BIPAVER General Assembly during the Essen Show. Any initiative will not be easy, though, as an analysis of the situation shows.
According to ETRMA figures, the total European truck and bus tyre replacement market has recovered somewhat since 2012 when it fell to a low of 9.6 million. In 2014 the market was back to nearly 12.2 million units – on a par with
18 Retreading Business