China's rising tire demand causes shortages
As vehicle sales rise -- especially in China -- global tire demand is expanding faster than production, Sumitomo Rubber Industries Ltd. said.
Tire sales in China, the world's largest auto market, may increase 30 percent this year, or at 10 times the global rate, President Ikuji Ikeda said in an interview.
Sumitomo Rubber, the largest Japanese tire maker after Bridgestone Corp., said global sales will increase 3 percent to nearly 94 million tires this year.
Rubber prices climbed 41 percent in the past year and reached a record in February after auto sales in China surged 32 percent in 2010 to an all-time high, surpassing the U.S. market for a second year.
China sales
Increasing costs spurred tire makers including Bridgestone and U.S.-based Goodyear Tire & Rubber Co. to raise prices.
"Tire supply and demand is tight globally and particularly in North America," Goldman Sachs Group Inc. analysts including Yuichiro Isayama said. "In contrast to many makers that retrenched due to the financial crisis, Bridgestone and Sumitomo Rubber increased capacity and are benefitting from growth in demand amid a global supply shortage," they said May 12.
While vehicle sales in China reached a record 18 million units last year, they slowed in 2011 as the nation increased retail gasoline and diesel prices and tightened monetary policy to cool the highest inflation since 2008.
The government increased interest rates to curb price gains that have exceeded the government's 4 percent target every month this year.
More capacity
Demand for replacement tires is growing in China as car ownership expands, Ikeda said.
Sumitomo Rubber, which controls about 6 percent of the global tire market, said it can process 46,000 tons of rubber a month this year, up 3.5 percent from last year.
The company said on May 17 that it is building a plant in Brazil that will have a capacity of 2,200 tons a month by 2013 and is also expanding production capacity in Thailand and China.
"Our production capacity is not large enough to meet expanding demand," Ikeda said in Tokyo on May 25. "The shortage may worsen" as global consumption is expected to grow 3 percent annually in coming years, he said.
