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The power crisis has hit the Chinese tire industry very hard. Beijing has set strict targets to cut emissions. This has been done to deal with the rising demand for electricity as well as surging gas and coal prices.
However, it is not just this industry but many others that have been forced to curtail production. Here it is pertinent to note that tire production requires a lot of energy and this has turned out to be a major problem. In order to cope with this situation many Chinese tire production companies have been forced to either curtail, or in some cases stop production altogether.
Energy Conservation Vs. Tire Output
Unfortunately, many of China’s top tire producing regions have missed their energy conservation targets. They are now facing a lot of pressure to decrease their power usage. In this case, the industrial tire making power houses that literally turn the wheels of the Chinese economy, are suffering from lack of energy.
The steadily deteriorating power crisis in China is a direct reflection of the extremely tight global energy supply. In fact, there is already a lot of chaos in Europe because of the economic rebound from the COVID-19 related lockdowns. This has led to very high demands especially from the automobile production sector.
However, China’s energy crisis is primarily due to its national policies. President Xi Jinping is trying to show his commitment to de-carbonizing the economy. Since the tire industry requires a huge supply of energy it has been penalized a lot.
The Impact on the Tire Industry
Spiraling energy rates amidst orders to decrease energy consumption, have also led to higher production costs. In the long run, this might translate to higher prices for customers all over the world.
Since tires are an integral part of virtually all earth moving equipment and automobiles, such an increase would automatically have a domino effect on the cost of vehicles and other equipment. This has the potential to lead to an increase in transportation costs as well as higher overall costs in the construction sector.
Surging Gas Prices: Adding Fuel to the Fire
On the other hand, gas prices are also at record highs as different nations try to outbid each other for supplies that are depleting very rapidly.
One by one, tire making companies both big and small, have informed their stockholders that they have received orders to restrict production activities till sufficient energy resources become available.
Tire Supply Chain Woes for the Whole World
Tires are part and parcel of the entire transportation as well as heavy earth moving industries, the global transportation and construction sectors will be adversely affected by this crisis.
Chinese tires have been instrumental in the promotion of the vehicle industry since they provide high quality products that are durable and reliable. This is why many of the world’s major automobile brands have been using Chinese tires on their vehicles.
However, the coming period might signal an upward shift in Chinese tire prices as well as supply crunches, as the sector struggles to keep up with increasing post pandemic demand.