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Local tyre manufacturer cautions against Chinese products dumping

24 August 2015 02:47 am - 0     - {{hitsCtrl.values.hits}}

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Chinese-origin tyres are starting to flood the local market, which could cause an adverse effect for locally manufactured tyres, according to Kelani Tyres PLC Chairman Chanaka de Silva.

“The global outlook for tyres from sources of origin such as Sri Lanka looks bleak due to substantial supply over demand. This situation has been further aggravated with the US Government imposing prohibitive duties on Chinese tyre imports which has forced Chinese manufacturers to start dumping to alternate markets in Africa, Middle East and Asia including Sri Lanka,” he said.

According to reports, the US Department of Commerce has imposed tariffs extending from 20 percent to over 100 percent in some cases, due to unjustifiable subsidies provided to the manufacturers by the Chinese state, allowing the companies to dump tyres to the US at below market rates.

“Although we did not experience the negative effects of this in Sri Lanka up to now, it is possible that this situation would have serious repercussions on volumes and margins in our business beginning next financial year,” de Silva said.

Kelani Tyres is the largest manufacturer of tyres in Sri Lanka operating in a joint venture with Indian tyre giant CEAT.

Rubber tyre manufacturing costs have gone down steeply during the past year due to a sharp decline in global rubber prices, partly due to an oversupply in the major growing zones in South East Asia, and partly due to the global oil slump, which has allowed for cheaper production of synthetic rubber through petroleum by-products.

While production at the joint venture slightly moderated to 15.44 million metric tonnes from 15.47 million metric tonnes year-on-year for the financial year 2014/15, average cost of sales fell to Rs. 6.25 million from Rs. 6.62 million year-on-year.

Export earnings of the company continued to drop from Rs. 3.14 billion in 2012/13 to Rs.2.77 billion in 2013/14 and Rs.2.42 billion in 2014/15.

With the moderation of the global tyre market, Kelani Tyres seems to be focusing on the relatively small local market.

“We are closer to achieving our objective of total import substitution of Sri Lanka’s tyre requirements with a quality product in par with international standards and brand names,” he stressed.

Meanwhile, rubber industry stakeholders in Sri Lanka say that smallholder rubber growers have resorted to cutting down rubber trees to sell for firewood in order to make ends meet, while rubber is being imported from other countries for significantly lower prices.

The sole plantation crop to remain profitable during the past year was palm oil.
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