Raw Materials
Goodyear has implemented temporary reductions in production at its North American tyre facilities due to disruptions in the supply of certain raw materials resulting from the impact of Hurricane Rita in Texas and Louisiana.
Goodyear has said it will cut costs by $750 million to $1 billion in the next three years, taking cash charges of $150 million to $250 million for the restructuring. The company’s share price rose 3 per cent in response. “Our clear goal is to be competitively advantaged in the tyre industry by 2008,” chief executive Robert Keegan said at an investors meeting. “We realise the rising materials, health care costs and inherent cyclicality of sectors in the industry will continue to challenge us.”
Goodyear Tire & Rubber Co has completed the sale of its Wingtack adhesives resins business to Sartomer Company Inc., a unit of the French energy firm Total SA.
Tyre manufacturers emphasise forward planning at Hillhead
This year’s Hillhead exhibition – the International Quarrying and Recycling show –– was sold out several months in advance of the event. As far as tyre exhibitors go the usual faces Michelin, Bridgestone and Goodyear Dunlop were there, joined by Marangoni, OTR Tyres, Rema Tip Top and Vacu Lug.
Over 16,000 visitors attended the biennial working event held at Buxton Derbyshire, a four per cent increase on 2003’s figures say organisers. However with the on going global shortage of OTR tyres both manufacturers and distributors were faced with never-ending product availability questions covering all segments of OTR tyres, giant medium and small and all sectors, mining, quarries and construction.
Demand for OTR tyres has fast outpaced world tyre industry expectations. Between 2003 and 2004, global demand for OTR tyres grew around 20 per cent, for some sizes demand was up by 30 per cent. What’s more this demand shows no signs of tapering off. According to Bridgestone global demand for rigid dump truck tyres is expected to be 50 per cent higher in 2005 than last year. Tyre manufacturers are still struggling to meet this growing demand and this will continue to be the case if, as expected, demand outstrips supply until 2007.
According to Continental Tire North America’s director of dealer sales, Jack Fenner, production levels of OTR tyres have remained flat since 1999 having only recently increased. Now, everything the tyre manufacturers are producing is being sold. According to Goodyear Tire & Rubber spokesman Dave Wilkins, every large tyre produced by the company in 2006 is already spoken for. And unlike passenger car tyres, earthmover tyres can not be produced by their hundreds each day.
The main reason for the global OTR tyre shortage is the rapidly expanding Chinese market. The country is consuming vast amounts of raw materials and commodities – such as copper, iron, gold, and coal – and is creating a massive demand for original equipment. In the last two years the price of natural rubber has more than doubled, putting all tyre manufacturers under pressure to increase the price of new tyres. These price increases are set to continue not only due to creeping raw material costs but those of shipping too.
“We fully understand the difficulties our customers are facing because we are also suffering from shortages of the raw materials we need to manufacture these specialist tyres,” said Bridgestone UK’s marketing manager, Barry Coleman. “We are all in the same boat and we want to ensure that we give advice and assistance to our customers during this trying period.”
Both tyre demand for OE and the replacement market is now above capacity supply. In an effort to address the shortage Bridgestone is spending £86 million to expand capacity at its Japanese plant by 20 per cent, but these new plans will not be completed until 2008. Michelin is also building a plant in Brazil to help meet growing demand for earthmover tyres, however this is not expected to be operational until mid-2007, and will be serving North and South American markets.
If capacities are not expected to improve in the short term, and tyres that are produced are likely to be allocated to the Asian markets to fulfil OE demand, what does this mean for the UK and in fact European markets? According to Barry Coleman the situation is going to get “very very tight” and the bottleneck of tyre orders will continue to increase. With current threats that quarries will close due to under efficiency, and with machines left standing due to a lack of tyres, the situation cannot afford to get any worse. It is also affecting the OEMs who can’t produce machines without tyres and so are having to review their product lines.
The OTR tyre situation in the UK may see a marginal improve in the next two years says Mr Coleman but not by more than five per cent. All that tyre companies can do until supply increases is to advise companies on how to make their tyres last, even if that means operating a quarry less efficiently. And so with the current shortage expected to last until 2007 the emphasis is on planning explains Goodyear’s director of Off-the-Road tyres Andy Morris, “there is a definite need for companies to maintain the tyres they already have because they are not available off the shelf. The key to which is forward planning, something which companies are getting a lot better at.” This message was one that all tyre companies attending Hillhead strived to communicate.
Indian newspaper, The Hindu Business Line, has awarded tyre manufacturer, MRF, its ‘Buy’ rating. “Though the recent trend of subdued growth in earnings may continue for a while, the long-term prospects are encouraging,” the newspaper reported.
“The performance of MRF and other tyre producers has taken a knock owing to the sharp rise in the price of key raw materials such as rubber and carbon black. The pick-up in demand in domestic and export markets has mitigated the damage to the bottom line,” the report added.
On 1 October the Chinese government will publish new rules on the management of the development of the tyre industry, according to the China Rubber Industry Association (CRIA).
Bridgestone Corporation will expand production capacity for truck and bus radial tyres at its Chonburi plant in Thailand. This move is in response to growing global demand for those tyres. At the same time, Bridgestone will increase production capacity at its Rayong plant in Thailand which manufactures and supplies steel cord for radial tyres. The aim of this is to secure stable supply of raw materials. Bridgestone reports that it has earmarked approximately 126 million euros for investment in the expansion work of these two plants.
Tyre maker Bridgestone Corp. said on Tuesday first-half operating profit edged up despite higher raw materials prices, and it lifted its full-year forecasts citing robust sales of high-end products. The higher forecast was expected after Bridgestone said last month it would likely post a smaller drop in 2005 operating profit than first thought thanks to brisk demand for tyres that offer higher safety or help raise fuel economy.
The Open Joint Stock-Company Amtel-Vredestein has announced new appointments. Managers with experience in Russian and transnational companies hold key positions in the company. Andrei Makov has been appointed Deputy General Director, Legal Issues; Gennady Frolov, Deputy General director, IR; Marie-Jose Nuelandt has been appointed Deputy General Director, HR; and Andrei Zyryanov, Director, Raw Materials Department.
(Akron/Tire Review) Cooper Tire & Rubber Co posted a net loss of $7 million in its second quarter of 2005, a downturn fuelled by the strike at its Texarkana, Arkansas, tyre plant earlier this year and rising raw material costs. Cooper also lost $2 million overall for the first half of 2005.
Net sales for the second quarter reached $511 million, up slightly from sales of $509 for the same period last year. For the first six months, Cooper racked up net sales of $1 billion, up 4 per cent versus the first half of 2004.
(India/Rubber Asia) Indian tyre prices are likely to go up by 4 to 5 per cent in the coming days, according to Mr. Onkar S Kanwar, chairman of Apollo Tyres Ltd. Rocketing prices of raw materials such as natural rubber, carbon black and other petroleum products, plus the existing duty structure which impacts the profitability of companies are the reasons for the impending tyre prices hike, he says.
Australia’s Ansell Ltd has slashed the value of its tyre-making joint venture with Goodyear Tire & Rubber Co by more than half, citing the impact of an influx of cheaper imports and rising raw material costs. In a move largely factored into analysts’ estimates, Ansell said it plans to write down the carrying value of its investment in South Pacific Tyres, or SPT, by $80 million Australian dollars to about A$58 million.
(Akron/Tire Review) Goodyear Tire & Rubber Co has agreed to sell its Wingtack adhesives resins business to Sartomer Company Inc, a unit of the French energy firm Total SA, for a reported $65 million. The sale includes a production facility in Beaumont, Texas, adjacent to Goodyear’s synthetic rubber plant there.
Goodyear said it will continue to supply raw materials to the adhesives resins plant. The adhesives resins business, with 115 employees, produces Wingtack brand hydrocarbon resins, which are used in pressure-sensitive and hot melt applications.
India’s Apollo Tyres has reported that it achieved record sales in the fourth quarter of its 2004/2005 financial year. At the same time the company announced a 45 per cent dividend. For the 2004/2005 year Apollo Tyres Ltd posted a gross turnover of 26.56 billion rupees (£332 million), a 15 per cent growth over the previous year. The company also registered the highest quarterly sales achieved in its history – over 7.5 billion rupees in the last fourth quarter. This represents 21 per cent growth over the same period last year. At the same time the company maintained three per cent net profit.
(Akron/Tire Review) The “Stop Counterfeiting in Manufactured Goods Act”, introduced by Rep. Joe Knollenberg (Republican) with the support of the Motor & Equipment Manufacturers Association (MEMA), has passed the US House of Representatives.
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