Now one of the largest tyre-producing countries in the world, China has an indisputable influence on the direction of global tyre trade. The home of both fast-growing up-and-coming brands as well as a burgeoning domestic market, this tag chronicles China’s involvement with the tyre business.
In a recent Tire Review interview, Guy Mannino, president and CEO of Pirelli Tire North America, spoke of the “pretty great year” his company had in 2004. He and Peter Tyson, vice president of advertising, public relations and motorsports, presented Tire Review with an exclusive look at its overall strategy for 2005.
RubberNetwork LLC, a tyre and rubber industry consortium owned by nine of the largest global tyre and rubber industry companies, has announced its year-end results.
The company reported cumulative savings of over $230 million (£121 million) since its inception. The company also noted that during 2004 it connected over 140 direct material suppliers to RubberNetwork members through RubberNetwork’s supply chain supplier network in Japan, Europe, and North America.
The US’s total trade deficit reached a record $617.7 billion, Tire Review reports, citing the Commerce Department. In 2004 the gap widened by 24.4 per cent compare with the previous year, thanks to increased costs of crude oil and more purchases of finished goods. According to the report, purchases of cars and tyres reached all-time highs. The trade deficit even reached as far as farm products, with Americans buying more cheese, wine and food products that the US exported.
In 2004 the value of China’s automotive exports, principally of components, reached $8.156 billion (£4.4 billion). The total equates to an increase of 73 per cent over 2003. China’s automotive components imports rose 13 per cent in a year that saw vehicle production decline in the last months, according to the latest data from the Mechanical and Electrical Department of China’s Ministry of Commerce. China’s trade deficit in automotive products was reduced from the $9.737 billion of 2003 to $8.177 billion last year. Customs statistics showed that in 2004 automotive imports reached $16.333 billion, the Xinhua China Daily reported.
China’s two largest tyre manufacturers have signed contracts to receive carbon black from the same supplier. China Energy will supply 1,000 and 800 tons to Hongzhou Chong Che Tire Company and Gui Zhou Guiyang Tires, respectively. Dong Hua Rubber Limited and Dong Tian Rubber and Chemicals Limited have also made contracts of 1,000 and 800 tons of carbon black, respectively. China Energy, Carbon Black Holdings, says it has received contracts amounting to 8300 tons of its speciality carbon black.
“In the past two years, we have been focusing our business on China’s fast-growing automobile industry. And it looks like this strategy is starting to pay off,” chairman and CEO, Mr Wang Guo Yuan commented adding: “Our carbon black helps the tyre makers to address the needs for improved tread wear, lowering rolling resistance, lower heat build-up. Therefore, our carbon black is being utilised for various types of tyres.”
Sumitomo Rubber Industries has said it will build a radial tyre plant in Thailand, Japan Today has reported. The new factory will be built in an industrial complex 100 kilometres south of Bangkok and will aim to produce 12,000 tyres per day two years after it begins operating in 2006, the report says. The facility will be the company’s third plant in Asia as Sumitomo Rubber already operates factories in Indonesia and China. The company reportedly made the decision to build the new plant in Thailand in response to growing global demand.
Kumho Tire, South Korea’s second-largest tyre maker, raised 373 billion won (around £193 million) in its recent IPO, according to the Reuters news agency. The total equates to the country’s largest issue in more than six months, the report added.
Kumho, which controls 42 per cent of the home tyre market, is selling 25.49 million shares at 14,650 won each, near the midpoint of an expected range between 13,250 won to 16,000 won, a source familiar with the deal said. The world’s 11th-largest tyre maker, will use the proceeds to expand its operations in China and slash debt. The dual listing in London and Seoul attracted good demand while Cooper Tire & Rubber Co. of the United States pledged to buy nearly 30 per cent of the shares offered, the report concluded.
For most, January marks the beginning of a new year, but for Federal 2005 represents the end of its golden jubilee. During 2004 the company celebrated 50 years of a business that has grown significantly since its earliest days and announced that it would expand its total production capacity to 8 million units in 2005.
In recent times, a number of companies have investigated the possibility of manufacturing in China. Federal too has sought to take advantage of this emerging market. Federal’s explanation for moving to the people’s republic is because of Taiwan’s “high labour costs.” Now, although work at the Federal Taiwan plant continues, the company also produces in China. According to the company, “the potential of the China plant is massive with capacity growing from 1.5 million units at the end 2003 to 2.5 million in 2004. “This figure will soar to 3.5 million by 2005 and the trend will continue until Federal’s total capacity, including its Taiwan plant, reaches 8 million units. The major expansion will take place in the China plant, which provides huge opportunities for any potential OE business in China,” says Jamie Ma.
With the growth in automobile manufacture in China and with most manufacturers intent on securing a manufacturing base, the potential of emergent companies such as Shanghai Automotive Industry Corp and China Brilliance have attracted Federal.
Commenting on the Chinese market Mr Ma said: “High-tech tyres such as the Hero Milanza UHP will definitely be a tyre that should generate great market demand. We intend to market the tyre, not simply by emphasising its price competitiveness, but rather by its trendy look and remarkable performance.”
One advantage Federal believes it has over other manufacturers is its delivery times. “Unlike many large-scale manufacturers that have delivery lead times of 90 days from order, Federal’s delivery time is typically one month. Although the unprecedented huge order volumes received earlier this year affected the delivery time, urgent measures have been adopted to cope with this increased demand and our customers will confirm that the delivery service is returning to previous levels,” explained DaWu Chen, senior manager at Federal’s global business department.
Now, half a century down the line from its beginnings, Federal wants to expand its influence around the world. “We intend to bring this same reputation for ultra high performance tyres to Europe and particularly for markets that have a significant demand for UHP tyres. The extended territory and market size of the EU provides a considerable growth potential and Federal plan to explore every new opportunity in this area,” said company president, Jamie Ma.
Federal won’t be drawn on where its marketing focus is, instead its states that its concentrates “on a general basis worldwide.” DaWu Chen suggests that other expansion into other European markets may follow a similar pattern to the how things have worked in the UK. “The kind of partnership seen in the UK, where an independent wholesaler has taken a proactive lead with aggressive marketing and promotion of the brand and the targeting of key customer groups, is fundamental to future market expansion in other European markets.”
Pulp and paper producer Lion Forest Industries Bhd (LionFIB) has proposed to acquire Silverstone Bhd, which manufactures tyres, The Star, Malaysia, has reported. Both Lion Forest and Silverstone Bhd are members of the Lion group.
In a statement given to Bursa Malaysia yesterday, Lion Forest said that wholly-owned subsidiary, Quay Class Ltd, had entered into an agreement with Silverstone Corp Bhd to acquire the entire equity in Silverstone Bhd for a total of 225 million ringgits (£31.31 million), to be paid for through a combination of cash and new Lion Forest shares. Silverstone Bhd is currently wholly owned by its holding company, Silverstone Corp, which is listed on Bursa Malaysia.
Lion Rubber Industries, a subsidiary of Silverstone Corporation, is proposing to sell its entire 55 per cent stake in Dong Feng Lion Tyre Co Ltd (DFLT) to Dong Feng Tyre Group (DF Tyre) in a deal valued at roughly £31.32 million. The Edge news service has also reported that the company terminated an earlier proposal to sell 10 per cent of DFLT to Beijing Jing Cheng Zhanye Bio-Technology Co Ltd.
The deal will reportedly help DF Tyre settle an inter-company loan and finance its plans to push internationally. Lion Group only recently orchestrated a joint venture agreement with China’s Shandong LuHe Group Co Ltd to make Silverstone-brand tyres in China for the Chinese market.
Bridgestone Thailand MD, Tomohiko Yoshimoto, is predicting his company’s truck and bus tyre sales will grow at least 10 per cent, Thailand’s Bangkok post has reported.
The future of western European car manufacturing is at risk unless the industry takes steps to improve its international competitiveness, a senior Ford executive has warned.
“The fact of the matter is, these days it is not a very competitive place to do business,” said Mark Fields, executive vice president of Ford’s Premier Automotive Group.
Tokai Carbon and Mitsubishi Chemical Corp have agreed to revoke their agreement to form an Alliance of carbon black businesses. The companies will also withdraw their application for examination by the Fair Trade Commission. The commission had suggested that “the alliance might substantially restrict competition in the Japanese domestic market that is presently short-supplied.”
“We anticipate harsher competition in the carbon black industry in Asia including Japan where aggressive capacity expansions are being made in expectation of rapid growth in the automobile industry, the main consumer of carbon black … We will expand and reinforce our business bases mainly in rapidly growing Thailand and China, as well as accelerate development into high added-value products and new market areas under the basic policy of ‘Powerful R&D,’” the company said in a statement. The stated that it would remain open to the possibility of future alliances.
Degussa has begun plans for a fourth production line at its carbon black plant in Qingdao, even though its third line is still under construction. The German company will significantly increase its manufacturing capacity in China with the new investment.
“After completion of our current expansion projects we will be able to produce more than 100,000 metric tons of carbon black,” said Robert Wissner, head of Degussa’s Fillers & Pigments Business Unit.
Having established its new European offices on 1 January, Toyo Tire invited guests to an official opening that fused European and Asiatic cultures. Dignitaries present included Toyo president and chief executive, Yoshio Kataoka and the Herbert Napp, the Mayor of Neuss, the German city where the new offices are based.
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