News from Notch Consulting, Inc.

May 15, 2011

Conti Expanding Mount Vernon, Building New Plant in Russia

Filed under: Carbon Black, General, Rubber Chemicals, Tire Cord, Tires — Notch @ 10:33 pm

On Thursday, May 12, Continental Tire the Americas L.L.C. announced plans to invest $224 million to expand its tire plant in Mount Vernon, Illinois, a project that will add 444 new full-time jobs at the plant. The project, which brings Conti’s total investment in the plant since 2006 to $486 million, will result in a significant increase in tire-producing capacity of nearly 4 million additional passenger and light truck tires annually. About $171 million of the planned investment will be used for new machinery and equipment, while the remaining $53 million will be directed at infrastructure upgrades.

Here is the press release.

According to Rubber & Plastics News (subscription required), in addition to expansion of passenger and light truck tire capacity, Conti’s commercial vehicle tire division will increase capacity at Mount Vernon by 15% by December 2012, bringing annual capacity to 3.15 million tires per year. The first 5% increase has already been achieved, according to Conti.

In addition to the the Illinois expansion, European Rubber Journal reports that Continental also plans to build a new car tyre plant in Russia. The company reportedly will choose a site by the end of June for a plant expected to be operational by the end of 2013. The plant would have capacity for 4 million units annually and represents an investment of around euro 200 million over the four-year period.

May 4, 2011

Century Enka expands nylon tire cord capacity

Filed under: Tire Cord — Notch @ 4:42 pm

India’s Century Enka Ltd. has completed the installation of additional capacity of 7,500 tons of nylon tire cord fabric (NTCF) in late April. The expansion raises the company’s total capacity for NTCF to 29,500 tons per year. The company is in the process of obtaining approvals from tire companies, and commercial production will be phased in over time.

April 28, 2011

Conti to build new tire plant in the US

Tire Business reported today (subscription required) that Continental A.G. is planning to build a greenfield-site tire plant in the U.S., Conti Chairman Elmar Degenhart told shareholders today at the firm’s annual meeting in Hanover. Specific details were not available.

April 22, 2011

Toyota production cuts may last through November

Toyota Motors has announced that its previously announced production cuts will last at least until November/December as the carmaker faces a parts shortage caused by last month’s earthquake and tsunami.

Toyota recently reopened its Japanese plants at reduced capacity

As TMC continues to address its production situation in Japan following the disaster, it has decided that vehicle production from May 10 to June 3 will proceed at approximately 50 percent of normal. TMC will decide on production after this period after assessing the situation of its suppliers and other related companies.

Today’s decision follows TMC’s previously announced decision to produce vehicles at all its Japanese vehicle-production facilities from April 18 to April 27 at approximately 50 percent of normal and for all production facilities to enter their annual spring holiday through May 9.

In North America, Toyota announced that previously announced production cuts would be extended to June 3, and that its factories in China would operate at 30-50% of capacity until that date. In addition, Toyota Motor said that production at its Japanese factories was likely to begin the recovery process by July, while its global operations will start to pick up speed by August. However a complete recovery in production levels may not happen until the end of the year, the company said.

April 6, 2011

Toyota to idle North American factories

On Monday, Toyota announced it will shut down all of its North American factories due to shortages of parts from Japan. The temporary shutdown is expected to affect about 25,000 workers. The length of the shutdown is unknown and will depend on how fast Toyota’s parts plants in Japan, which supply some 15% of the components used by Toyota’s North American plants, can resume normal production levels. GM’s plant in Shreveport, Louisiana has also been idled due to supply chain problems related to the quake.
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In the wake of these reports, Toyota issued a press release stating that,

Contrary to recent headlines, nothing has changed from our update from March 23rd regarding our North American operations.

We continue to assess our supply base in Japan following the earthquake/tsunami. We have communicated to team members, associates and dealers here that some production interruptions in North America are likely. It’s too early to predict location or duration.

Currently, the greatest majority of parts for our North America-built vehicles come from approximately 500 suppliers in North America. Also, we continue to receive parts from Japan that were already in the pipeline, limiting the immediate impact. We will continue to work closely with suppliers in North America and Japan to minimize any disruptions to Toyota’s overall North American operations.

April 4, 2011

US defunding membership in International Rubber Study Group

Filed under: Carbon Black, General, Rubber Chemicals, Silica, Tire Cord, Tires — Notch @ 11:44 pm

From Rubber & Plastics News: The U.S. Department of State is on defunding U.S. participation in Singapore-based International Rubber Study Group effective June 30, despite protests from US companies. The IRSG is an intergovernmental organization based in Singapore that acts as a forum for the world’s rubber producers and consumers. It is the authoritative source of statistical data and analysis for all aspects of the rubber industry, including production, consumption and trade in rubber as well as rubber products. Currently 16 countries and the European Union are contributing members of the IRSG: Belgium, Republic of Cameroon, Cote d’Ivoire, France, Germany, India, Italy, Japan, Malaysia, Nigeria, Russian Federation, Singapore, Spain, Sri Lanka, Thailand, and the United States.

According to R&P News:

The State Department cites the Rubber Manufacturers Association’s unhappiness with the accuracy of IRSG figures as a reason for ending U.S. participation. However, the RMA said it long ago changed its mind and now enthusiastically supports U.S. involvement.

According to the State Department, the U.S. formally submitted its intention to withdraw to the IRSG Secretariat Oct. 29.

“As producers and consumers of rubber have changed over the years, the relevance of data produced by this organization and the utility of U.S. government participation for U.S. industry has been put into question,” the agency said in a March 22 letter to the Rubber Trade Association of North America. “China, the world’s largest consumer of rubber, is not a member.”

Also, no important decisions on NR production are made during IRSG meetings, the State Department said. In the unlikely event that NR supplies to the U.S. are threatened, the agency is prepared to aggressively assure U.S. access, it said.

This decision has huge ramifications for US-based companies that need IRSG data for market research purposes, since the cost of membership rises astronomically for companies in non-member countries. There is no alternate source for these data; the IRSG provides an essential and irreplaceable service to the tire and rubber industry.

February 28, 2011

India’s ATMA charges dumping of tires by China, South Korea and requests duty-free imports of raw materials

Filed under: Carbon Black, Rubber Chemicals, Tire Cord, Tires — Notch @ 6:43 am

The Automotive Tyre Manufacturers Association (ATMA) of India has charged China and South Korea with dumping tires on the Indian market, according to Commodity Online. The association also has asked for duty-free imports of key raw materials, including synthetic rubber, tire cord, and rubber chemicals.

It is estimated that Chinese and South Korean rubber imports account for 70% of India’s tyre imports with various bilateral agreements nullifying the import duty of 10% and coming over with a basic customs duty tag of 8.6%, reported Financial Express.

With respect to imports of truck and bus tyres for 2009-10, the rate of imports has gone up by 35% for 2010-11, when calculated on annualized basis. Import of passenger car tyres has gone up by 40% for the same period.

Also, the industry has asked for duty-free imports of 2 lakh tons of natural rubber which is a projected deficit for 2011-12. As the Union Budget approaches, the association has also demanded duty-free imports of almost all raw materials like butyl rubber, styrene butadiene rubber (SBR), ethylene propylene non-conjugated diene rubber (EPDM), PBR, steel tyre cord, polyester tyre cord, nylon tyre cord and rubber chemicals.

In fact, cost of raw material is responsible for 70% of the production cost and about 62% of tyre industry turnover.

SRF expanding beyond nylon tire cord

Filed under: Tire Cord — Notch @ 6:30 am

Indian-based technical textile maker SRF Ltd. plans to invest Rs 665 crore on expansion projects, including a new plant in South Africa and another in Gujarat, according the Economic Times.

“While we are determined to expand operations in all our businesses to achieve and retain global leadership, the expansion in the chemicals and the packaging films businesses is part of our overall strategy and ongoing efforts to reduce our dependence on nylon tyre cord,” SRF MD Ashish Bharat Ram said.

The plant in South Africa will be dedicated to biaxially oriented polypropylene (BOPP), while the Bangladeshi plant will be dedicated to biaxially oriented polyethylene terephthalate (BOPET).

February 14, 2011

Goodyear Shutting Union City Plant by Year-end

Goodyear has announced that it intends to close its tire plant in Union City, Tennessee by the end of 2011 as part of a program to cut manufacturing costs globally. The plant employs 1,900 workers and has about 12 million units/year of capacity. This closure is the last component of a restructuring program that Goodyear initiated in 2009 that was aimed at cutting 15 million to 25 million units of high cost capacity. This action is expected to provide annual cost savings of approximately $80 million.

Here is the pertinent section of Goodyear’s latest earnings report:

Tennessee Plant Closure

Goodyear today announced plans to close its Union City, Tenn., tire manufacturing facility by the end of 2011 as part of its strategy to reduce high-cost manufacturing capacity globally and provide cost effective high-value-added products that the market is demanding while continuing to make high quality products for its customers.

“While we are committed to manufacturing in North America, all of our plants must be cost competitive and be able to demonstrate sustainable world-class productivity. That is not the case with this plant, and as a result, the market has moved beyond what the factory is able to build,” said Kramer.

This closure, when complete, will eliminate approximately 12 million units of available capacity and is the final action in plans announced in 2009 to eliminate 15 million to 25 million units of high-cost capacity globally. This action is expected to provide annual cost savings of approximately $80 million. The Union City plant currently employs approximately 1,900 associates.

Goodyear’s fourth quarter 2010 after-tax restructuring charge related to this action was approximately $160 million. Total after-tax restructuring, accelerated depreciation and asset write-off charges for this action are estimated to be approximately $270 million, of which approximately $140 million will be cash charges.

January 24, 2011

Yokohama expects commercial tire supplies to remain tight in 2011

After a very sharp downturn that began around mid-2008 and deepened during the downturn in 2009, the commercial truck tire industry recovered strongly in 2010. Yokohama’s website has an interview with its own Dan King on the situation in 2010 and the prospects for 2011. A few excerpts below. The whole interview is here.

Question: Despite the tough economic climate, the commercial tire industry weathered the storm, and for Yokohama, business actually increased. What were some of the factors that helped the company report positive numbers in 2010?

King: Simply put, demand increased. In 2009, there was a huge reduction in inventory levels almost across the board, including the tire industry, and the retail and consumer packaged goods. Fleets, for example, went so far as cannibalizing tires from their other trucks that were not in operation. Because of the recession, there was a lot of risk to carry inventory.

However, in 2010, the economy began to turn around and trucks started to get back on the road. It was this pent up demand that primarily contributed to a very successful year for Yokohama.

Question: Do more trucks carrying goods translate to more commercial tire sales?

King: Yes, actual vehicles on the road, miles being driven and freight being hauled are very good indicators of commercial tire sales and where the economy is going. All of those show signs of improvement and that we’re heading in a positive direction.

Question: From a pure industry perspective, how would you describe the 2010 commercial market?

King: 2010 was definitely much better than 2009, but it also came with its challenges. The biggest issue for Yokohama and the industry was fill rate. It started really in the middle of the year, and it’s been very difficult for us to reach our increasing demand. Yokohama had huge increases in demand – actually higher than the industry’s – and it’s been difficult for us to supply to that demand.

Question: Is Yokohama increasing manufacturing and/or using more of the global supply and putting it in the U.S. market?

King: Both, we will allocate more production from Japan and will be expanding production at other plants.

Question: The spiraling cost of raw materials has to also be on the list of 2011 concerns…

King: Unfortunately, we do not see it letting up, especially through 2011. We’ve had to announce a price increase that started in January. Unfortunately for us, it’s not as high as what we’re experiencing in cost increases, so we can’t pass on everything. We’re willing to absorb that for right now, but we do believe raw materials will continue to escalate through 2011.

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