Major shift in Chinese tire-compound rules

Beijing - China is reportedly preparing to enforce new regulations on compounded rubber that could alter the market landscape.

The regulation, which could be introduced early in 2015, redefines compounded rubber as with a maximum of 88 percent crude rubber in its composition, reports in China indicate.

The current regulation allows 95 percent-99.5 percent crude rubber constitution.

Most of China's consumption of compounded rubber and standard rubber is imported from ASEAN countries. As no tariff is placed on these imports, the compounded rubber is often chosen as a substitute for standard rubber by China's tire makers.

According to stories in the Chinese media, currently many tire makers use compounded rubber as a substitute for standard rubber - the 95-percent-or-above crude rubber constitution makes such substitution possible,  and it costs much less - there is a 1,200yuan/tonne tariff on standard rubber.

With the new regulation, materials with 95%-or-above crude rubber constitution will no longer have zero tariff, as they no longer fall into the category of compounded rubber.

Tire makers are, therefore, likely to either switch to more costly standard rubber, or have the 88-percent materials custom made (otherwise they can't be used as substitutes for standard rubber.

The latter move would, however, also involve extra costs, and the ASEAN suppliers currently lack capacity to provide such custom-made materials in bulk.

Meanwhile, analyst expect an increase in compounded rubber imports to China before the new regulation comes into force.