SA Plastics

Nuvo study shows how rubber imports from China hammered SA co’s

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Table 1 – Change in annual output (in thousand tonnes) of rubber products manufactured in SA between 1999-2014

THE SCALE of the impact of imports from China on the South African rubber manufacturing industry has been far more severe than even the most skeptical of analysts may have originally believed.

According to a study commissioned by Nuvo Rubber Compounders of Pietermaritzburg, the effect of Chinese rubber imports on the local sector over a 15-year period, from 1999-2014, resulted in the sector’s ‘trade deficit’ jumping from R0.6-billion in 1999 to R6.9-billion in 2014 – this equates to imports growing from 9000 to 40,000 tonnes tons per year.

In what was the first study of its kind in South Africa in which the analysis split the rubber industry into tyre and ‘non-tyre’ sectors, a far clearer picture of the plight of manufacturers in the ‘non-tyre’ sector emerged. Non-tyre refers to technical rubber component manufacturers.

Prior to the study, the non-tyre component manufacturers had been lumped with the far larger tonnage tyre sector and been almost completely overlooked.

Dr Donal Ryan of Nuvo handled the comprehensive study. His analysis separated the direct effect of Chinese imports on domestic production and employment.

Trade data from SARS and StatsSA and data from several rubber industry sources were used. A questionnaire survey of rubber component manufacturing companies who are members of the Institute of Materials (IOM3) was also carried out. A number of the non-tyre rubber manufacturers also compound rubber material and supply this to the local market and in some cases export too, adding a slight further complication to the research process.

According to Ryan’s findings, imports of non-tyre rubber components (usually mouldings such belting, hose, mining, transport and other sectors) climbed far more steeply during the period than that of tyres. In the year 1999, imports were minimal but had grown to over 30,000 tons/year by 2013 – which incidentally was also the first year when imports began to decline slightly.

The tyre sector also suffered due to the high rate of tyre imports during the period, but imports were sourced from other origins besides China.

“Imports into SA had a significant and negative effect on growth in domestic production in the non-tyre sector and on employment growth in the overall industry,” said Ryan (see Table 1).

The table refers to the overall change in annual output in the tyre and non-tyre sectors between 1999 and 2014. For example, the annual domestic production in South Africa in 2014 was 25,000 tonnes higher than it was in 1999. This increase was caused by an increase of 36,000 tonnes due to the domestic market demand and 19,000 tonnes due to export market demand. But imports had a negative effect of 30,000 tonnes meaning that imports effectively reduced domestic production by this amount.

Note that the ‘imports effect’ outlined in Table 1 is for imports from the whole world – not just China.“Further analysis of the effect of imports showed that Chinese imports alone directly detracted over 26,000 tonnes from domestic production in the non-tyre sector between 1999 and 2014,” said Ryan. For the tyre sector, the figure was lower but at an estimated 7000 tonnes, nonetheless had an adverse effect on that sector.

The findings presented in Figure 2 relate specifically to the Chinese imports effect and suggest that the non-tyre sector could have grown by as much as 83% over the 15 years, whereas it actually achieved a far lower 40%. Tyre production also suffered due to imports from China, but what was even more telling was that total employment in the industry fell by as much as 23% - whereas about half those jobs could potentially have been saved if a proper strategy to combat the high rate of imports had been adopted.

“Even without these imports the tyre industry would only have grown by 2% due to a drastic drop in the demand from the domestic market since 2008,” he added.

“Almost 3500 jobs were lost in the rubber industry between 1999 and 2014 – almost half of which were directly due to the rise in Chinese imports.”

 

Survey

Ryan then conducted a survey of rubber manufacturers and interviewed with 26 companies, yielding some interesting replies, including that

  • 100% felt the industry was in decline and 100% felt rising imports were a factor in this;
  • 63% suggested labour unrest and poor efficiency were also factors;
  • 38% of companies have experienced increased output – over 80% of who cited exports as a contributing factor;
  • 73% felt import duties should be increased;
  • 47% felt workforce skill level needs to be improved; and
  • 33% felt technology needs to be improved

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