Bloomberg News

Rubber demand in China, the world’s largest auto market, could be unchanged this year as consumption by the heavy-truck sector slows while tire output for passenger vehicles climbs, according to Hangzhou Zhongce Rubber Co.

Demand for tires for large trucks will slow as the country shifts from heavy industries to a more consumption-driven growth model, Chairman Shen Jinrong said. China’s tire industry will use 3.25 million metric tons of natural rubber this year, according to the China Rubber Industry Association.

Rubber prices have dropped 14 percent this year in Shanghai and 6.6 percent in Tokyo amid turmoil in Europe, stockpiles at the highest in three years and slower economic growth in China. About 70 percent of China’s natural-rubber use is in tire making, of which 70 percent is in heavy-truck tires, said Tong Jingjing, an analyst at Sri Trang (Shanghai) Co., a unit of Thailand’s biggest rubber exporter.

“The Chinese tire industry will endure thin profit margins,” Shen said. “We need to further upgrade and continue to focus on the passenger car tire market.”

China’s tire output may rise by 4 percent this year, said Deng Yali, chairman of the association. The industry, facing rising labor costs and overcapacity, will see its utilization rate further reduced this year from the current average of 84 percent if output growth is below 10 percent, Deng said.

“A 4 percent increase in tire output doesn’t translate into a 4 percent increase in the natural rubber demand,” Shen said. “Most of the growth is in passenger car tires, which use less natural rubber, and tire makers are opting to use more synthetic rubber.”

China’s synthetic consumption will climb 7.8 percent this year, the association said.