By Nao Nakanishi
HONG KONG, July 26 (Reuters) - An automotive boom is driving China into pole position as the world's largest rubber consumer, surpassing the United States where Wall Street's problems are forecast to put a brake on car sales later this year, commodities traders say.
As Chinese car sales are expected to top one million this year, a rise of nearly 40 percent over 2002, the world's top tyremakers are moving into China and expanding production there.
Japan's third-largest tyremaker, Sumitomo Rubber , became the latest to announce a project in China. It said on Thursday it would begin automobile radial-tyre production in April, 2003 for export as well as the booming domestic market.
"Almost all the tyre makers are now in China, though some Europeans are lagging behind," said a trader.
"I wouldn't be surprised if Chinese rubber demand grew as much as 20 percent, given the expansion in the auto industry that is growing much faster than the GDP."
Other top tyre makers in China include Goodyear, Bridgestone Corp , Yokohama Rubber Corp and Toyo Tire & Rubber, and French tyre giant Michelin that announced in March a $200 million joint venture with China's top producer Shanghai Tyre and Rubber.
Many in the rubber industry forecast Chinese rubber imports to hit one million tonnes or more this year after growing about 15 percent to about 980,000 tonnes last year.
With China expected to produce domestic rubber of 400,000 tonnes this year, it means the country's rubber consumption will match that of the United States, if not exceed it, as soon as this year.
They estimated the United States would consume about 130 million tonnes and Japan and Europe about 60 million tonnes each.
SHOE EXPORTS
"They are also planning to export tyres everywhere," said another trader. "So they are also getting pickier in choosing raw materials. We can no longer talk about China-grade."
The traders said Chinese rubber demand was also fueled also by the growing shoe industry, which some estimated accounted for 80-90 percent of global output of rubber boots and sneakers.
The first trader calculated that of total Chinese rubber demand, about 80 percent was from the tyre industry and another 15 percent the shoe industry.
Until two years ago, Chinese annual rubber demand stood constantly at around 800,000-900,000 tonnes, with one half covered through domestic production and the other half by imports.
It stunned the international rubber market when its custom data showed imports doubled to more than 800,000 tonnes in 2000.
For a long time, nobody could explain the sudden increase, especially as no suppliers had detected such strong appetite from China throughout the year.
However, the traders seemed to have found the answer, at least partially.
China no longer purchases natural rubber exclusively through Chinese traders, such as SinoChem, they said. They are also included in orders placed by international tyre makers who cover their global needs altogether.
The first trader said: "What China is concerned about, is that there are no bearish factors.... This should push up global demand by some two percent this year."