Raw Materials
Goodyear’s tyre factory in Gadsden, Alabama, has again been shut down of a week due to a shortage of raw materials and to reduce the company’s overall tyre production, company officials announced on September 29. This is the second such recent occurrence for the Gadsden plant; between August 16 and September 2 the facility was closed for an ‘inventory adjustment’.
Raw material shortages and ‘soft demand’ in the North American market are the factors behind Cooper Tire & Rubber’s October 1 announcement that it would ‘adjust’ production facilities at its US facilities. The company says hurricanes in the Gulf Coast areas have affected its suppliers’ ability to provide sufficient raw materials to maintain full production at all US facilities, and thus materials will be directed to those plants currently producing items demanded by customers.
Solideal Group has announced that it will increase prices on tyres in Europe by 7-8 per cent. The new prices will take effect in October and November 2008. Solideal increased prices earlier this year due to continuous increases in Raw materials, which went beyond the group’s expectations. The company reports that it has attempted to absorb some of the increased raw material cost through increasing production efficiencies and research and development costs, however, Solideal says that it is forced to recover some of the recent cost increases.
Attendees to TyrexpoAsia 09 will have the opportunity to join colleagues from the raw materials side of the industry to debate key elements of the International Rubber Study Group’s World Rubber Summit in Singapore next March. The theme for the Summit has now been announced as ‘Global Demand and Supply: Facing the challenges in a rapidly changing world.’
Access to the Summit is a direct result of the collaboration between TyrexpoAsia and the International Rubber Study Group (IRSG), which will see delegates networking and participating in both events next year. IRSG draws its membership from 16 major rubber producing and consuming countries and the European Union, plus over 100 associate members from all kinds of rubber related companies around the world.
The commercial truck tyre production unit at Goodyear’s Topeka, Kansas plant will shut for a week on Monday 22 September. A spokesman reported that the reason for the closure is that the supply of raw materials had been affected by Hurricaine Ike. The plant will continue to manufacture OTR and military tyres, while Truck staff members have the option of using a weeks’ holiday allowance or taking a week of voluntary layoff.
(Bloomberg) Bridgestone Corp. plans to sell a new fuel-efficient tyre outside Japan to lure drivers trying to cut gasoline costs. Bridgestone will sell its Ecopia line of tyres, which improve a car’s fuel economy by as much as 5%, in markets including North America and Europe following a domestic launch in April this year, Takashi Tomioka, director of Bridgestone’s tyre products strategy division, said in an interview.
Gasoline prices have jumped 27 per cent in the U.S. this year, cutting demand for new cars. Tokyo-based Bridgestone forecasts demand for replacement tyres will be unchanged and consumers will be willing to pay higher prices for fuel-efficiency. “The sales volume on these tyres is very small,” said Kunihiro Matsumoto, senior analyst at UBS AG in Tokyo. “But it’s positioned as a high-performance tyre and priced to contribute to earnings.” (Tire Review/Akron)
On September 16 the announcement was made that Goodyear has entered into a research collaboration with Genencor, a division of Danish company Danisco A/S, to develop a bio-based process for producing isoprene using renewable raw materials.
Goodyear and Genencor are working on a product called BioIsoprene, a bio-based alternative for the petroleum-derived chemical compound isoprene. BioIsoprene can be used for the production of synthetic rubber and other elastomers. The development of BioIsoprene could, says Danisco, make the tyre and rubber industry less dependent on oil-derived products, such as synthetic rubber made from petroleum-derived isoprene monomer.
Tuesday saw a significant drop in the price of Goodyear shares on the NYSE, leading analysts at KeyBanc Capital Markets to drop their company rating from “Buy” to “Hold” and lower 2008 earnings estimates on the stock by 30 cents (to $1.90 per share). Afternoon trading resulted in Goodyear shares dropping $2.36 (12 per cent) to $18.05.
Sinochem International Corporation subsidiary Sinochem International (Overseas) Pte Ltd. has Bought a 51 per cent stake in Singapore-based natural rubber producer GMG Global Ltd. for SG$ 267.98 million (£106.4 million). GMG operates natural rubber business in Africa and elsewhere with plantations in Cameroon and Ivory Coast and processing facilities in Indonesia. Amongst other things Sinochem International expects the deal to help position it for growth in the global rubber market. China contributes to over 20 per cent of the world’s natural rubber consumption but only produces 7 per cent of the production.
Michelin were upgraded on 3 September to a rating of “outperform” by a Credit Suisse report. Margin stability and a sharp fall in oil prices have led analysts to the conclusion that the French manufacturer will continue its upward trajectory on the markets despite “volume and raw materials headwinds”. The brokerage believes that Michelin is “on track to deliver an 8.2 per cent margin in 2008 thanks to solid price and cost discipline.”
With this in mind, the report also raised the target price on Michelin shares from 40 euros to 58 euros, adding the caveat that “to justify value beyond this level we believe management needs to better explain restructuring cost savings.” Credit Suisse maintains its scepticism on the subject of Michelin’s long-term margin and growth targets.
A Deutsche Bank analyst report indicates that Goodyear’s decision to close 92 “underperforming” retail locations in the US is a good thing. “Overall, we view this announcement positively,” says the report, “as it demonstrates additional cost savings as GT (Goodyear).” The closure of the retail stores is expected to result in after-tax charges of US$40 million and generate savings of $9 million per annum. This level of savings, says Deutsche Bank, could potentially add $0.03 to $0.04 to its earning estimate.
Merrill Lynch’s upgrade of Michelin stock due to declining oil prices and prospective replacement segment sales growth led to the company’s largest rise in six weeks of Paris trading. The stock gained up to five per cent (a gain of 2.23 euros, leaving stocks at a high of 46.59 euros) today, while the latest figures at 15:37 show a 4.7 per cent rise.
The analyst’s report suggests that the decrease in oil prices will continue to support a recovery for Michelin’s stock as revenues rise following decreased raw materials outlay. Merrill’s London-based analyst Thomas Besson raised his recommendation to “buy” from “neutral”, which prompted the increase in activity.
The Shandong Yinbao Tyre Group is set to embark on a programme of international expansion. Established in 1994, the company has become a famous name in China, designing, manufacturing and marketing tyres and inner tubes for the domestic market, under the brand names GoodTyre, Yinbao and Huibao. The product range is extensive and includes truck, agricultural and industrial tyres, as well as giant OTR tyres, for example, size 36.00 R51, plus a range of inner tubes. Products are already exported to over 50 countries, but the company, under the direction of chairman Mr. Yonghua Liu, has decided that the time is right to concentrate more on developing export business.
Manufacturing is carried out at three plants in China and Shandong Yinbao has built up a network of distributors to handle sales outside China. The products are all DOT, ECE, INMETRO and SNI approved, among others. As well as adopting a policy of continuous quality improvement, the company is dedicated to extending the life of its tyres and, as an example, its website proudly mentions the fact that the company’s heavy-duty, radial truck tyres are capable of running for 200,000 kilometres.
Citing the continuing escalation of the price of oil and rubber, the TIA of the USA has compiled a list of five questions that fleets should ask of their tyre repairer of choice. This, the company believes, should help companies ensure that their tyres are being repaired using the approved method.
The suggested questions are the following:
“Will the tyre be demounted from the rim, so it can be thoroughly inspected? On-the-wheel, or plug repairs are by far the most dangerous, because the tyre is never removed from the rim to be inspected on the inside.
As of October 1, prices for Hankook Tire products in the US will increase by up to 10 per cent. The new price structure will apply to the company’s full range of passenger car, light commercial and truck tyres.
“While our company continues to make every effort to control manufacturing and distribution costs without compromising service to our customers, the unprecedented increases in the costs of raw materials and energy make this announcement necessary,” stated Bill Bainbridge, Hankook’s director of brand communications. He added that the company’s price increases are consistent with price rises announced recently by other major tyre manufacturers marketing their products in the US.
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