China's thirst for cars makes natural rubber production a priority

By Namrita Chow, Automotive News Europe

Beijing, China -- China's thirst for automobiles is unquenchable. In 2007 a total 8.56 million vehicles were sold, a year on year jump of 18 percent.

Of that number, 5.23 million were passenger cars, 1.99 million were trucks and 1.34 million were buses sold in 2007, as per data from J.D.Power and Associates' Automotive Resources Asia.

In fact, Wang Fengyin, president of Great Wall Motor Co., says she expects China to sell 10 million passenger cars this year-speaking via a translator at the Automotive News China conference this week ahead of the Beijing Auto Show.

Rakesh Sachdev, Asia Pacific president of chassis and body systems maker ArvinMeritor Inc. says he expects all segments to increase by 10 percent year-on-year. Speaking at the conference he says: “[A] Segment that is really growing in China is the larger premium bus.” He also expects passenger car makers in China to enter into production of trucks.

Increases in both commercial and passenger vehicles imply a dramatic increase in the demand for tyres. Consequently there is a sharp increase in the demand for raw materials such as natural rubber.

China grows rubber in Hainan Island which is across the water from the Philippines towards the east, Malaysia and Brunei towards the south, Indonesia (Natuna Islands) towards the southwest, and Vietnam towards the west. Hainan Island occupies a land mass of 35,000 square kilometres. China also grows rubber in Yunnan province which borders Vietnam, Laos and Burma.

The downside is that “natural rubber will only produce economically viable yields in these southern geographical locations of China,” says a Goodyear Tire Co. spokesperson.

In 2007, total production of rubber in China was 600,000 tonnes as per information from the International Rubber Study Group. But China consumed 2,550,000 tonnes. Producing only around 24 percent, the country imported over 1,547,000 tonnes in 2007.

To meet the increasing demand for natural rubber, China is expected to increase natural rubber production to about 780,000 tonnes by 2010.

Expansion will take place in Hainan Island and in Yunnan. China currently has about 800,000 hectares of rubber plantations.

Future growth is expected via both an increase in hectares of rubber plantations as well as with improvements in technology in planting high yield clones and more intensive tapping operations, explains a Goodyear spokesperson.

In China natural rubber plantations are for the most State owned. None of the global players have plantations in China.

China's government has also been rapidly expanding the country's road network, so much so that in the next few years China's total road length is expected to surpass that of the US, says Frank O'Brien, Asia Pacific executive vice president of automotive part maker Magna International Inc. speaking at the Automotive News China conference. “So, lots of space to drive vehicles,” says Mr.O'Brien. Availability of roads is very important-no roads would mean no buyers, he says.

“Generally, China's double digit economic growth has boosted the auto sector, fuelling demand for rubber-a key material in tyre making. Exports of tyres are also part of this growth,” says Goodyear.

“As China continues to grow and tire companies increase production to meet demand, it is clear that demand for natural rubber will also grow,” says Goodyear.