EU Raises Standards Affecting China’s Tire and Rubber Industry

On June 1 this year, the much-anticipated EU Restriction of Chemicals Act (REACH Act) will come into force. The bill will implement mandatory registration, assessment, licensing, and implementation of safety monitoring of all chemicals entering the EU market. These include about 30,000 kinds of chemical products, home appliances, textiles, clothing, footwear, toys, light industry, electronics, automobiles, pharmaceuticals, and so on.

Sources pointed out that the implementation of this bill will have a significant impact on the chemical industry over a period of time. Although a small number of companies with technological advantages are likely to gain excess revenue. But most of the chemical industry enterprises will greatly increase the cost pressure. Among them, tire and rubber manufacturing enterprises may be more impacted.

The EU passed the Act on Registration, Evaluation, Licensing and Restriction of Chemicals on December 13 last year. In the 3 to 11 years after the implementation, the EU market about 30,000 kinds of chemical products and its downstream textile, light industry, pharmaceutical and other more than 5 million kinds of manufactured products need to be implemented in all safety monitoring. All relevant chemical and downstream products are required to be registered. And only after being permitted to circulate in the EU market. Companies that do not participate in the registration within the specified time will pay huge additional costs to enter the EU market.

Customs information shows that in 2006, the total value of China’s domestic chemical exports to the EU was 4.4 billion U.S. dollars. The main products are plastics, rubber, organic or inorganic chemical raw materials, a wide variety of chemical intermediates, etc. According to the existing import and export data, it is expected that the bill will increase the cost of products exported to the EU by more than 5%. And make the cost of products imported from the EU increase by more than 6%.

Industry insiders said that after the implementation of the bill, at least 730 kinds of domestic chemicals exported to the EU will face the test of registration, assessment and licensing. This will greatly weaken the competitiveness of Chinese chemical companies in the EU. Reduce the profits of Chinese producers.

Although from a macro point of view, the implementation of the bill will help accelerate the pace of development of Chinese export products perfection. The advantageous enterprises through registration will also get a long development by changing and optimizing the product structure. However, within a period of time, the formal implementation of the bill will have a negative impact on the import and export of China’s chemical industry and its downstream products industry.

Chinese chemical companies are mostly resource and labor-intensive enterprises. The export volume of hazardous chemicals in their products is large and covers a wide range. Most of the exported chemicals are mainly low-grade products with low added value and profit. On the other hand, the EU is an important source of petroleum and chemical products for China. China’s chemical imports from the EU are mainly high-grade, high-value-added organic, inorganic and synthetic chemical materials that are urgently needed at present. Overall, the implementation of the bill will increase the import and export costs of Chinese chemical companies.

A typical example is the rubber tire manufacturing industry. 30-40% of China’s domestic production is exported, mainly to the United States and the European Union. Rubber tires generally contain carcinogenic additives aromatic oil, and harmful substances zinc oxide, the EU market ban after 2008. The implementation of the bill will slow down the pace of Chinese domestic products such as tires and rubber into the international market. Some small-scale enterprises, due to weak technical reserves, will face the pattern of market elimination and mergers. For the relevant enterprises, they should try to choose to avoid when making investments.

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