Bridgestone Says Yuan Policy Won’t Affect China Sales

Bridgestone Says Yuan Policy Won’t Affect China Sales
April 26 (Bloomberg) -- Bridgestone Corp., the world’s largest tiremaker, expects sales volumes in China to increase “aggressively” this year even if the nation allows its currency to appreciate against the dollar.

Sales of tires for trucks and buses in China will probably exceed the 2008 level by more than 10 percent, Director Yujiro Kanahara said in an interview. Car and sports-utility tire sales will also grow, he said. The Tokyo-based company doesn’t disclose specific figures.

China’s car sales jumped 76 percent to 3.52 million units in the first quarter as government stimulus policies helped boost demand in the world’s biggest vehicle market. A yuan revaluation could make tire imports cheaper and lower the cost of raw material purchases, boosting competition among producers. China may allow its currency to appreciate by June 30 to curb inflation, a Bloomberg survey of analysts showed this month.

“We don’t expect China to increase tire imports, even if it allows the yuan’s appreciation, as the government protects the domestic market by tariffs,” Kanahara said in an interview in Tokyo. “A stronger Chinese currency would cut purchasing costs” for rubber from abroad, intensifying price competition among tiremakers, he said.

Bridgestone operates four tire plants in China, selling most of the products made there in the domestic market. The company plans to boost production in the country by 43 percent from last year to 100,000 metric tons this year. It also exports tires to China from Japan, where the company’s output is expected to rise by 16 percent to 510,000 tons this year.

Record Price

Growth in Chinese demand and a seasonal drop in supply from Thailand, the world’s largest exporter, has sent cash rubber prices surging. The free-on-board price, which excludes freight and insurance, of Thai RSS-3 grade rubber for May-delivery rose to a record 128.55 baht ($4.0) per kilogram on April 23, according to the Rubber Institute of Thailand.

“It is an abnormal, unbelievable price,” Kanahara said. The rally may have been caused by “not only fundamentals but speculative moves as well,” Kaoru Tomizawa, Bridgestone’s public relations manager, said in the same interview on April 23.

“We have routes to secure the raw material without making deals in the market,” Tomizawa said. The company uses short- term and longer-term hedging to control the effect of price changes, he said, without elaborating.

Rubber represents about 50 percent of the volume of each tire, Tomizawa said. Half of the rubber used in tires is natural, and the rest is synthetic made from petroleum.

Rubber Substitution

Soaring prices of natural rubber may be spurring tire makers to increase the use of synthetic rubber as an alternative, Tomizawa said. Isoprene rubber can be used, although “there is a limitation on substitution,” he said.

Sales of passenger car tires in China will rise as demand for new models is growing, he said. Volkswagen AG, the biggest foreign carmaker in China, will invest 4.4 billion euros ($5.9 billion) in plants and new models by 2012, while Nissan Motor Co. aims to boost capacity almost 70 percent, the companies said on April 23 at the Beijing Auto Show.