◎ Chen Weifang
In the first half year of 2018, main economic indicators of China’s rubber machinery industry are somewhat unexpected: main indicators suddenly turn negative; completed sales revenue and realized profit decline nearly 10%; the export delivery value is almost halved. The rubber machine industry, which has already entered the ascending channel, has encountered a head-on blow. From the current orders, it is predicted that the situation will be severe throughout the year.
Sales Revenue Significantly Declining beyond Expectation
According to China Chemical Industry Equipment Association Rubber Machinery Professional Committee’s statistics of main economic indicators of 23 major rubber machinery manufacturers in China in the first half year, the completed sales are RMB 3.156 Billion Yuan, declining by (year-on-year, the same below) 9.4%. Based on this, it is calculated that the completed sales of rubber machinery industry in the whole country reached RMB 4.21 Billion Yuan in the first half year, declining by 9.5%. The decline in sales is too significant to expect in the industry.
Originally, the rubber machinery industry has entered ascending channel since 2017, and the carry-over order is also good. However, after 2018, the situation has changed rapidly, mainly in the following aspects:
Firstly, the Chinese government has strengthened its efforts in environmental governance. In particular, the Shandong government has included tires in chemical manufacturing industry. It requires that from year 2017, the location of tires should enter the park, and that enterprises with profits and taxes of more than RMB 100 Million Yuan should be monitored emphatically. This has caused a great impact on tire projects in Shandong and other places in the short term, resulting in delayed delivery or suspension of some contracted rubber machinery contracts.
Secondly, after the United States International Trade Commission (ITC) announces the arbitration result that the truck and passenger car tires from China do not cause damage, China’s overseas investment tire projects have shown signs of slowing and hesitating. Phenomenon appears that equipment in rubber machinery enterprises have finished the work, but tire companies do not pick up the goods, so product inventories have risen sharply.
Therefore, the sales of rubber machinery enterprises that are mainly based on tire machinery decline more; while the production and orders of rubber machinery enterprises that are mainly based on non-tire rubber machinery are full, and sales mainly increase. In tire production equipment, the demand for engineering tire production equipment is better than that for passenger tires and truck tire equipment.
According to sales revenue, the top ten companies are successively MESNC, Dalian Rubber & Plastics, Huaxiang Auto-control, Guilin Rubber Machinery, Doublestar Rubber and Plastics Machinery, Tianjin Saixiang, Yiyang Rubber & Plastics, Sichuan Yaxi, Guilin Engineering Company and Wuxi Double Elephant. Sales revenue of the top ten adds up to RMB 2.81 Billion Yuan, accounting for 66.8% of total sales revenue, and industry concentration decreases by 1.7 percentage points.
Difficult to Change Unsatisfactory Profit
For the statistics of participating companies, the profit in the first half year declines by 8.4%, and the industry’s profitability is not satisfactory. There was one loss-making enterprise, which accounted for a relatively small proportion.
Main reasons for the decline in profits in the rubber machinery industry are the reduction in orders and delayed delivery. At the same time, the sharp increase in prices of raw materials such as steel also lowers the profit level.
Current period inventory decreases, inventory increases, orders in the industry are limited and competition is fierce. In addition, price of raw materials is high. It is predicted that the rubber machinery industry will not improve its profit level in the second half year.
According to additional statistics, the number of employees in the industry continues to decline. The main thrust is the improved degree and level of automation in the industry. The output value of new products of company decreases by 23.6%.
Large Decline in Export
According to the statistics of participating companies, the realized export delivery value reaches RMB 382 Million Yuan in the first half year, sharply declining by 53.6%. It is estimated that the total export value in the first half year is USD 72 Million, declining by 55%. The export delivery rate (value) is 12.1%, declining by 11.5 percentage points, and the export rate is a new low in recent years.
According to export delivery value, top ten companies are MESNC, Tianjin Saixiang, Guilin Rubber Machinery, Dalian Rubber & Plastics, Huaxiang Auto-control, Beijing Jingyie, Sichuan Yaxi, Yiyang Rubber & Plastics and Wuxi Double Elephant successively.
China’s tire overseas factory project is partially stopped or postponed, resulting in a decrease trend in the export delivery value of China’s rubber machinery products from the second half year of 2017. However, with the escalation of the US trade war against China in May this year, overseas construction projects are now showing signs of speeding up.
From the perspective of global market, a new round of tire investment is in ferment. The main players include not only relatively active multinational tire companies, but also a large number of small and medium-sized tire companies, which provides opportunities for China’s rubber export.
Although the United States has listed China’s rubber machinery in the 50 billion tariff list in the trade war, it has little effect on the export of rubber machinery to the United States, because China’s export share of rubber machinery to the United States is originally low.
Based on the above factors, it is predicted that China’s rubber machinery exports will improve in the second half year of 2018 compared with the first half year, and the year-round decline in export delivery value will be greatly narrowed.
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