We have just published the January issue of our global tire industry newsletter, and distributed it to subscribers.
This 32-page publication includes:
· Our predictions for the global tire industry in 2018,
· Our review of China’s tire industry and its prospects for 2018
· An update on the search for sustainable NR
· Analysis of imports to the EU from China of PCR and TBR tires
· Data on the EU vehicle parc
And for good measure we have included our monthly update on the China Tire Industry.
Then there is a further 16 pages of news and analysis, covering the world’s tire news from across the value chain including investments, appointments, legislation, statistics, Raw materials, company results, company information and environmental developments.
Global tire industry in 2017-2018
The article below is an edited version of our analysis of the global tire industry in 2017 and prospects for 2018 – it is about half the length of the version printed in our newsletter.
Four themes stood out for the tire industry in 2017
· Global trade protectionism
· Greater globalism in manufacturing and marketing footprints
· Sustainability relating to natural rubber and end-of-life tires
· A growing realisation that the mobility revolution will affect tires.
It will be no surprise to close observers that some of these themes – notably trade protectionism and greater globalism in the manufacturing and marketing footprints have continued from 2016.
In this review, I’ve ignored the chaos in raw materials pricing that affected the tire industry in the last quarter of 2016 and the first couple of months of 2017, because it is basically last year’s story. Raw materials prices are currently stable with no rapid price movements expected.
Trade protectionism, retreads and dumping
Trade protectionism was one of the main themes of 2016, and that has continued into 2017. We fully expect there to be more news in this area in 2018.
Probably the biggest news story of 2017 was the decision in March 2017 by the US ITC that imports of TBR tires from China had not damaged the domestic US tire industry.
People are still recovering from the shock of that decision.
In August, India’s investigation into dumping of TBR tires from China came to an end. Almost inevitably, the decision was made to impose duties of up to USD450/tonne on imports of these tires.
Over the Summer the EC had also carried out a preliminary investigation in the dumping of TBR tires from China. In August that found that there was a case to answer and launched a formal investigation into possible dumping. The first indications of tariffs are expected to be made in May 2018 – nine months after the initial announcement, dated 11 August 2017. The investigation will conclude by November 2018, within 15 months of the initial announcement.
Just as India imposed extra duties, everyone we speak to in the tire world expects the EC to find that the industry has been damaged and that China is dumping tires into the EC market.
Separately, the retread community in Europe is looking at issues around the increase in single-use TBR tires in Europe, from extra energy and materials used in single-use tires compared with tires that are retreaded, to the excess number of scrap casings being dumped across the region due to the reduction in retreads.
For 2018, we expect that much more news on the EC case will emerge in the first months of the year. Subscribers can see more of our analysis of these important issues.
Globalism in the manufacturing footprint
2017 will surely go down as the start of a new wave of global restructuring and expansion across the tire industry.
Apart from the abortive attempt to sell shares in Kumho Tire to an industry consortium led by China’s Double Star (see below), we saw Pirelli split out its TBR activities and also re-list its PCR activities on the Milan stock exchange.
We have also seen significant developments by tire makers based in China to expand in South-East Asia and beyond into the United States and possibly Europe.
There have also been significant moves by premium tire makers to acquire distribution and e-commerce outlets around the world.
In terms of overseas expansion, three China-based tire makers: Sentury, Wanli and Triangle have all said they intend to build factories in the United States.
We have more in-depth coverage of these projects in the January edition of our global tire industry newsletter.
During 2017, one issue stood out: Sustainable sourcing of natural rubber to minimise de-forestation. For 2018, I have a feeling that the issue of micro-particles will move toward centre stage.
During December 2017, DeutschePost/DHL announced plans to add micro-particle filters on its electric-powered delivery trucks, to collect tire dust from the air around delivery routes.
Although much of the public debate so far has focused on micro-plastics, I think it may only be a matter of time before people begin to raise the issue of Tire and Road Wear particles (TRWP).
I asked the WBCSD Tire Industry Project (TIP) for comment on this, but the head of that project, Phillipe Fonta, did not respond to any of my emails, despite previous claims that the organisation would provide more information. I believe the TIP is not seeking to resolve this debate, but merely to provide a cover for the tire industry’s inactivity in this area.
I calculate that a car tire starts out with around 8mm of tread depth. After a few years, the tire has completed something like 50,000km, and the tread has worn down to perhaps 3mm.
On a rolling diameter of around half a metre, and a tread width of something like 200mm, that translates to roughly 2kg of rubber material worn away over the lifetime of each PCR tire.
The number for truck tires is a little more difficult to estimate, due to retreading and the associated buffing process, but an estimate of 12 kg per tire over its lifetime is definitely on the low side.
Europe consumes some 250 million passenger car tires per year. Multiplying up, a very rough calculation shows that around a million tonnes of rubber is deposited across the continent each year. Half of that comes from PCR tires and half from TBR tires. Figures for the United States are broadly similar. Globally, the world consumes about 1500mn passenger car tires, corresponding to 3mn tonnes of rubber dust deposited on the world’s roads. The 150mn truck tires consumed globally adds a further 2mn tonnes of rubber dust. According to published research, each TRWP is composed 50-50 of rubber compound and materials used in road construction. That makes 10mn tonnes annually.
The question the tire industry needs to answer – and urgently – is where does that dust go?
Environmental pressure groups have identified some of this dust in marine organisms and are calling on the industry to step up and improve the situation.
So far as I am aware, the tire industry has no reliable data to show how much of this material makes its way into rivers and streams and down to the oceans.
Tire makers need to understand exactly what happens to all that tire dust, if they are to argue against pressure groups who assert that tires are a significant cause of micro-plastic pollution in the world’s oceans. In my view, a serious lack of engagement by the WBCSD is damaging the industry’s image in this area.
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I will put 2017 down as the year the tire industry started to take notice of the forthcoming mobility revolution.
I spent much of the year talking to people about how the changes in mobility will affect the tire industry. Views varies widely and there is a deep hunger for more insight into this important area.
Because many changes in this area – and others – are happening simultaneously, the debate sometimes remains focused on one or other aspect of these changes, leading to confusion among many tire makers.
In reality, tire makers are having to prepare for substantial changes in their business models across a wide range of aspects, from new design criteria for tires for EVs, to data acquisition systems such as sensors in tires to new sales models to cater for large fleets of shared-ownership vehicles.
For 2018, I strongly believe this trend will develop more strongly. Tire makers will become much more aware of the changes required to keep up with forthcoming changes in society and how the vehicle makers are responding to those changes.
This will be one of the key developments throughout 2018 – keep up to date by subscribing to our monthly newsletter on the global tire industry. One corporate subscription covers all employees globally.
It is our strongly-held view that the tire industry requires a major shake-up in its management processes.
In the last year or two, Bridgestone has removed a large layer of management from its operations and replaced those long-time tire experts with people mostly from outside the tire industry.
Meanwhile Michelin has rolled out its ‘Responsabilisation’ programme that seeks to give managers more responsibility and in turn expects them to act more as trainers and coaches than as top-down decision-makers.
These are the two most significant aspects of a change in management approach in the tire industry .
I have argued elsewhere that the tire industry management has – for good reasons – become highly risk-averse. In a time of limited change, adopting a low-risk, low speed management style was appropriate. The tire industry in Europe and North America has experienced decades of stability where very little changed and the risks associated with making any change-based decision tended to be outweighed by the advantages of maintaining the status quo. As a result, relatively little has changed in the industry for a few decades.
This issue is being discussed in our global newsletter on the tire industry.
We looked exhaustively at the development of the deal between Double Star, Kumho Tire and the banks and others during the year. Since that deal has collapsed we have only briefly analysed the position of Kumho Tire. Its assets still exceed debts, but the information is somewhat opaque, and the basic numbers do not appear to have changed significantly over the last few years, despite a certain amount of turmoil in the business. According to the company Q3 trading statement, Kumho Tire claims assets of KRW5.105 trillion and liabilities of KRW3.93 trillion – giving it a surplus of around USD1bn
The company filed for court receivership on 29 September, and was expected to emerge from that process on 28 December 2017.
On 28 December, Kumho Asiana spun off the Kumho Tire group. Kumho Tire said in a stock market announcement that it is no longer part of the Kumho Asiana group.
On 1 December, the creditors named Jongho Kim as CEO.
Background to the newsletter
The aim of this newsletter is to offer a clear path through the massive amount of information you can get on the global tire industry. Each month our editors scour the world’s news and pick only the stories that are relevant to change in the industry. Then we add in some unique commentary on why those stories are relevant.
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