retreading and chinese tire makers · 2019. 6. 7. · doublestar ($770.5mn) guizhou tire ($769.3mn)...

R E S E A R C Hhttp://TireIndustryResearch.com China and retreading by David Shaw

Retreading and Chinese tire makers

David ShawCEO

TireIndustryResearch.com

[email protected]+44 208 647 1185+44 797 128 2336


AgendaChina Tire Industry

Main players Developments in 2017-2018Expansion and consolidation

Retreading in ChinaNot much

Retreading in US & Europe 2010-2017Volumes decreasingPrices fallingConsolidation

Drivers for changes in retread sectorChinese single use tires ?Big names extending offer to smaller fleets?Super-singles?

Retread managementAdapting to new business environment?Economic modelling and forecastingAdded services

2018EC duties on TBRRetreading boucing backAre these linkedMy view

Tire Industry ResearchWhat we do

Q&A


China’s tire industry

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20000

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ChinaBridgestone

$24045m$21564m

Wanli ($548.0mn)

Zhongce Rubber ($$3377.1mn)

Linglong Tire ($1400.7mn)

Hengfeng Rubber Plastics ($1397.6mn)

CST Xiamen ($1368.8mn)

Xingyuan Tire ($1337.0mn)

Sailun Jinyu ($1309.3mn)

Doublecoin ($1110.3mn)

Aeolus ($1008.4mn)

Doublestar ($770.5mn)

Guizhou Tire ($769.3mn)Yuelong Rubber ($698.8mn)Prinx Chengshan ($682.5mn)

Haohua Tire ($650.0mn)

Henan AiTeChi Tire ($152.3mn)Fujian Haian Rubber ($156.2mn)Nankang (Zhangjiagang Plant) ($170.0mn)Shandong Taishan Tire ($205.7mn)Shandong Sanli Tire ($238.7mn)

Goform Rubber Plastics ($260.0mn)

Xulun Rubber ($269.4mn)

Chaoyang Longmarch ($278.2mn)

Bayi Rubber ($280.8mn)Sentury ($307.0mn)Yinbao Tire ($397.2mn)

Shandong Hawk International Rubber ($455.8mn)Zhongyi Rubber ($468.8mn)Shandong Ogreen ($477.1mn)Sichuan Haida Rubber ($489.2mn)GST ($529.3mn)

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ChinaBridgestone

$22121m

$23788m

Zhongyi Rubber ($554.7mn)

Zhongce Rubber ($3201.7mn)


Prinx Chengshan ($1620.4mn)

Yuelong Rubber ($1542.9mn)

Guizhou Tire ($1124.7mn)



Aeolus ($1008.4mn)


Guizhou Tire ($769.3mn)

Yuelong Rubber ($698.8mn)Prinx Chengshan ($682.5mn)

Haohua Tire ($650.0mn)

Shandong Ogreen ($214.9mn)

Fengyuan Tire ($228.5mn)Fujian Haian Rubber ($256.5mn)

Tianjin Wanda Tire ($338.0mn)Nankang (Zhangjiagang Plant) ($354.2mn)

Taishan Tire ($390.7mn)

Shannxi Yanchang ($450.2mn)Shandong Taishan Tire ($454.5mn)

Shandong Hawk International Rubber ($468.8mn)

Shandong Sanli Tire ($470.8mn)Chaoyang Longmarch ($512.9mn)Bayi Rubber ($514.0mn)

Sentury ($535.1mn)Huasheng Rubber ($548.2mn)

Ningxia Shenzhou Tire ($200mn)Shandong Zhentai ($195.7mn)

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ChinaBridgestone

$24350m $26689m

Pirelli ($858.7mn)

Zhongce Rubber ($3423.4mn)

Linglong Tire ($2073.7mn)


CST Xiamen ($1429.2mn)

Hengfeng Rubber Plastics ($1398.3mn)


Xingyuan Tire ($1246.0mn)

Triangle ($1192.7mn)

Aeolus ($1072.1mn)


Guizhou Tire ($1049.5mn)Doublecoin ($997.4mn)Haohua Tire ($867.3mn)

Goform Rubber Plastics ($320.7mn)

Zhongyi Rubber ($399.0mn)Bayi Rubber ($420.7mn)

Huasheng Rubber ($431.8mn)Yuelong Rubber ($475.2mn)

Wanli ($497.8mn)

Sentury ($511.9mn)Shandong Yongfeng Tire ($524.9mn)

Yinbao Tire ($546.6mn)

Sichuan Haida Rubber ($552.9mn)Wanda Boto ($596.1mn)GST ($596.9mn)

Jiangxi Tire ($609.8mn)Prinx Chengshan ($723.8mn)

Hengyu Technology ($316.2mn)Chaoyang Longmarch ($310.9mn)

Lorem ipsum

2016-17

2015-16

2017-18


2017 2018 revenue 2018 growth YoY op. profit Op margin rev 2017 growth YoY op. profit Op margin tire sales 2016

10 9 Zhongce 3979 18.3% N/A N/A 3364.9 -3.3% N/A N/A 3479.6

9 10 CHENG SHIN 3675 -0.4% N/A N/A 3691.7 1.5% 276.1 7.5% 3636.7

14 14 Kumho 2341 -8.0% -82 -3.5% 2545.3 0.3% -138.8 -5.5% 2537.0

17 16 Linglong 2257 10.8% 517 22.9% 2038.2 28.7% 155.1 7.6% 1583.7

18 17 Sailun 2040 8.0% 404 19.8% 1888.5 12.7% 53.3 2.8% 1675.8

11 18 Giti 2001 -40.4% N/A N/A 3360.1 15.0% 0.0 0.0% 2921.1

19 19 Nokian 1875 5.5% 438 23.3% 1777.0 15.4% 412.9 23.2% 1539.7

22 ? Hengfeng 1374 N/A N/A N/A 1374.5 52.6% N/A N/A 900.9

32 21 Double Coin 1156 16.8% 134 11.6% 990.6 -23.6% 0.0 0.0% 1297.3

25 23 Triangle 1119 -4.5% 239 21.3% 1172.3 16.0% 99.4 8.5% 1010.3

26 ? Gajah Tunggal 1057 N/A N/A N/A 1057.5 10.8% N/A N/A 954.3

24 25 Xingyuan 1054 -13.9% N/A N/A 1224.7 22.7% N/A N/A 998.4

27 29 AEOLUS 927 -12.0% 3 0.3% 1053.8 -4.5% 0.0 0.0% 1103.7

34 ? Haohua Tire 852 N/A N/A N/A 852.5 91.9% N/A N/A 444.2

30 30 Guizhou Tire / China 854 -17.3% 14 1.6% 1031.6 69.5% 0.0 0.0% 608.5

35 32 Prinx Chengshan 776 9.1% 84 10.8% 711.4 8.1% 0.0 0.0% 658.0

29 28 Double Star 558 -5.7% 4 0.7% 591.7 -20.3% 0.0 0.0% 1099.2

37 35 Sentaida / Sentury 503 N/A N/A N/A 503.2 45.4% N/A N/A 346.2


Zhongce: ThailandLinglong: Thailand, Serbia, ChinaSailun; VietnamGiti: USA, IndonesiaDouble Coin: ThailandTriangle: USA, China

Aeolus: ChinaGuizhou: VietnamPrinx Chengshan: ThailandDouble Star: KumhoSentury: Thailand, USA

China’s tire makers expand


China’s tire makers consolidate

Dec 2016: ≈600 ≈650 factories



2030:≈15 firms ≈150 factories


Retreading in ChinaCategory PCR & LT TBB/ TBR Total

Vehicle PARC 2017 170mn 47mn 217mn

Avg Tires per Vehicle 4 12

Tires in use (mn) 680 564 1,244

Percentage replaced each year (%) 20% 45%

Percentage retreaded (%) Zero 2%

Annual Waste Tire Amount (mn units) 136 244 380

Waste Tire Output (Tire/Ton) 130 18

Annual Waste Tire Output (mn t) 1.046 13.54 14.59 Source: Ministry of Public Security, as of the end of 2017


Retreading in Europe

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4.1mn

2007 2010 2015 2018


15.717.3 18 18.4

19.2

14.9 15.614.8 14.5 14.3

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2013 2014 2015 2016 2017

New TiresRetreads

US Truck Tire Replacement Market (in millions) Retreading in North America


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Rest of WorldRussiaJapanTurkey

Other Asia

Korea

China

JDNOSAJJMAMFJDNOSAJJMAMFJDNOSAJJMAMFJDNOSAJJMAMFJ

EU-28 imports of heavy TBR tires (40112090) by origin (units)2016: 6.89mnChina: 4.41mn

(64.0%)

2015: 6.11mnChina: 3.84mn

(62.8%)

2017: 7.13mnChina: 4.65mn

(65.3%)

2018: 6.34mnChina: 2.21mn

(34.9%)

More Chinese imports


Fuel saving≈5% improvement

Weight saving≈360kg less per truck

Cost savingHalf the number of tires

Super-Singles (Wide-based tires)Introduced in 1980s & ‘1990s

Adoption rates in US low un-til 2005 or so

Adoption rates in Europe higher ≈30% in 1990s

Growth tends to be gradual

Coincides with reduction in retreads? Or just one of many factors


Letter from Joe Casebere January 2019:

I just want the retread industry and tire publica-tions to honestly report the second largest cause of the diminishing retread pool.

The 2.45 million retread deficit reported by (TRIB’s) David Stephens at the International Trade Commission this year is not completely the fault of the Tier 4, cheap, imported new truck tires.

That is fake news.


Letter from Joe Casebere January 2019:

My estimates indicate that more than one-third of those 2.45 million losses were directly associated with WBSS.


³ Economic models improving ³ Offering added-value (TPMS, Telematics etc) ³ More info available from aggregated fleet data ³ Stronger legislation requires better management ³ Fleets becoming more professional ³ Customers seeking ‘Green’ credentials

Big-brands are selling into smaller fleets


Adoption of super-singles is affecting market

growthImports of low-priced TBR tires

driving price competition

Big brands sell-ing into smaller

fleets with added-value

Three drivers of change

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JDNOSAJJMAMFJDNOSAJJMAMFJDNOSAJJMAMFJDNOSAJJMAMFJ

EU-28 imports of heavy TBR tires (40112090) by origin (units)2016: 6.89mnChina: 4.41mn

(64.0%)

2015: 6.11mnChina: 3.84mn

(62.8%)

2017: 7.13mnChina: 4.65mn

(65.3%)

2018: 6.34mnChina: 2.21mn

(34.9%)


Were the independent retreaders able to cope?

Could they understand these changes?

Could they predict the impact of these drivers?

Did they have the right management vision?

Did they have the right people?

Did they have sufficient resources?

Disruption in the business environment


Whatever does not kill me, makes me stronger

³ Marangoni now making acquisitions ³ Mid-sized companies sold to majors ³ Much better offer, together with added-value ³ Bringing in more professional managers ³ Taking broader look at business landscape ³ Retread volumes picking up


³ Decline in retreads is real ³ Three main drivers for this change ³ Imports; Super-singles; Better selling by majors ³ Fleets getting smarter, want more added-value ³ Retread management forced to adapt ³ Those who did not adapt failed ³ prospects good for those who adapted

Conclusions


Tire Industry Research

Page 1 of 12 — Week ending 26 April 2019 © 2019 Shaw Information Services Ltd

China Tire Intelligence reportWeek ending 26 April 2019

This newsletter contains information about the tire industry in China. The information is provided in good faith, but it is not advice, and should not be treated as such. Without prejudice to the generality of the foregoing paragraphs, we do not represent, warrant, undertake or guarantee that the information in this newsletter is correct, accurate, complete or non-misleading.We will not be liable to you in respect of any special, indi-rect or consequential loss or damage.

Compiled by Shaw Information Services trading as Tire Industry Research© 2019 Shaw Information Services Ltd

For subscription [email protected]+44 208 647 1185

www.TireIndustryResearch.com

ContentsSection 1: Outlook 2Guilin to build CNY10,000mn auto pole 2China PMI index surges in Feb, March 2

Section 2: Domestic tire makers 3Guizhou Tire publishes 2018 results 3Haoyou Tire temporarily closes 4GST Thailand plant receives 11 years’ tax relief 4Double Coin tire revenues fell in 2018 4GST holds annual shareholders’ meeting 4Zhongce subsidiary plans TBR expansion 4Vanlead tire project receives gov’t funding 4Giti launches TBR line at Shanghai Motor Show 4Timsun may be shut down by the government 5Timsun commemorates War of Resistance 5Timsun and the Government refute rumours 5Linglong adds more stock market investments 5Land Mining releases 2018 tire business data 5Guizhou Tire pays missing tariffs 6Kaixuan Rubber penalises “chain” dealers 6Aeolus report reveals changes to executive pay 6Guopeng Rubber attempts another auction 6Tire dealer falls into loss in 2018 6Triangle published 2018 & 2019 Q1 Results 7Double Star develops custom tires for Yuchai 8Tire employees receive Labour Awards 8

Section 3: International tire makers 8Kumho Nanjing achieves “Green Development” 8Pharma company reveals Michelin lawsuit 9Cooper, Chinese partners launch Sunitrac 9

Section 4: Data and statistics 9Chinese coal output grows in March 9

Section 5: Upstream and suppliers 10Chemchina releases 2018 annual results 10YRM launches intelligent twin screw extruder 10CNPC Lanzhou workers help improve efficiency 10Hainan Rubber releases supervision report 10Shandong inspects Black Cat Jining plant 11Hainan Rubber to hold dividend plan briefing 11Tianhua Institute finishes resource integration 11JN Coke announces annual results 11

Section 5: Retail and online activities 12Tire King works to grow market after financing 12

Section 6: Environment & recycling 12Tire recycling factory in Taiwan catches fire 12Guangrao hits tire companies for violations 12

Section 7: Other activities 12Qingdao recommends Double Star tire tech 12Media reports on GST’s Belt and Road effort 12Tire companies exhibit at Shanghai Auto Show 12

Return to Contents page

R E S E A R C H

R E S E A R C H


Tire Industry Research

Month ending 29 April 2019 © 2017 Shaw Information Services Ltd R E S E A R C H

Compiled by Shaw Information Services trading as Tire Industry Research© 2017 Shaw Information Services Ltd

For subscription [email protected]+44 208 647 1185

China Tire Monthly reviewMonth ending 29 April 2019

China’s tire industry in MayIt’s results season in China. One of the challenges of understanding the tire industry in China is that, until a few of years ago, all the tire makers were either privately-owned or government-owned, so there was relatively little public information on the companies.

Over the last fi ve years or so, a series of tire makers have issued shares on public exchanges, meaning that they are forced to report some offi cial numbers, and cannot simply make them up, as Triangle did for years.

The top tire makers to report their information publicly include• Linglong• Triangle• Guizhou• Double Star• Sailun• Aeolus• Prinx Chengshan• GST (General Science and Technology)• Giti (Jiatong)• Huayi and its subsidiary Double Coin

In addition a number have raised money through the third boards such as NEEQ.

This means we now have some reasonably reliable data to offer on the current status of the Chinese tire industry.

Having said that, these publicly-quoted companies tend to be biggest and the best-managed. Thus, they are better placed than most to weather the storms currently affecting China’s tire industry.

The smaller companies are still suffering, so it is not always appropriate to extrapolate data from these top companies to the rest of China’s tire industry.

Having said that, our analysis of the published results so far is that even these top companies –with a couple of exceptions – are suffering.

Triangle, Double Coin, Double Star, Sailun, Aeolus, Guizhou, Giti have all reported single-digit declines in revenue, due largely to falling tire prices.

However, profi ts are largely up over a year ago. Aeolus, Guizhou returned to the black on an operating basis, while most of the others reported improved profi ts. Double Star remains a loss-maker.

In an interesting announcement, Aeolus revealed the compensation of its top managers - Chairman, Wang Feng received a relatively modest CNY1.6mn in 2018.

The two exceptions are Linglong and Prinx Chengshan. Linglong reported a huge 33% increase in revenues and a 10% increase in operating profi t.

Prinx reported a relatively modest 10% increase in revenues, but profi ts jumped by almost three times.

In both cases, we put this down to good management.

Just as an aside, we’ve been looking through the numbers and the only company to report specifi c raw materials costs is Triangle, who said that the total raw materials bill is 62% of corporate revenues. This compares with around 22% for Michelin and 29% for other premium tire makers, but around 60% for Indian tire makers.

Among upstream suppliers, the fortunes are mixed. A few, such as carbon black and silica supplier, JN Coke have reported big jumps in revenue and profi ts. Most others have suffered from the consolidation among their cus-tomers, with bad debts incurred from tire makers who have closed before paying for their materials or equipment being a common cause of fi nancial problems among the suppliers.

Industry is suff eringIn the fi rst two months, total tire production in China was down by 7% YoY, showing continued weakness.

CRIA predicted tire production volumes for 2019: down 2% overall, with TBR down by 12% and PCR up by 1%.

We think this is over-pessimistic on the truck side, but optimistic in the car segment. The truck tire business seems to be recovering in Q1, with logis-tics fi rms returning to work after the Spring break, and the government has announced a number of huge infrastructure projects, which will lead to increased demand for earthmover and heavy transportation of earth and other materials.

Meanwhile car sales in China in the fi rst quarter are just as dismal as in the last quarter of 2018, with Q1 car sales down 11% on last year.

We also note that the Caixin PMI index was at the historically-low level of

48 in January, but recovered strongly in February and March to almost 51. This suggests that purchasing managers are getting more optimistic about a positive resolution to the US-China trade dispute.

Factory closures and consolidationMeanwhile, there is a certain amount of restructuring going on, in the light of duties being imposed on China-made tires by the United States and by Europe.

Kenda, Federal and Cheng Shin are closing old factories in China and seeking to expand or build in SouthEast Asia - notably Vietnam.

We continue to report almost weekly on more factory closures, bankrupt-cies and loss of capital funding.

Amid all this disruption, a number of larger chains are emerging. Both Sky Tire and Shandong Linghang Tire are starting to emerge as powerful forces, as they acquire assets of bankrupt companies.

SkyTire has struck deals with ChemChina to buy Yellow Sea and Beili

ELT tire activities coming to the foreWe’ve been getting a lot of questions recently about the end-of-life tire (ELT) situation in China. We published a signifi cant report on that during April, and have looked at how the business is changing – and it is chang-ing very fast, as China fi nally wakes up to the fact that ELT is a signifi cant issue.

The ELT industry is restructuring even more rapidly than the tire makers. However, there is no reliable infrastructure to collect the ELTs that are dispersed across the country.

Historically, this task was carried out by families who – close to the pov-erty line – would run around an area with a motorbike and a scaffolding pole, collecting tires, and carry them on the pole back to a small-scale base.

The vast majority of these operations have been closed in the environ-mental crack-down. While there are technologies that can dispose of tires, China is still struggling with the best way to dispose of tires. Unfortunately, without the collection infrastructure, many of the projects being set up in China at present will struggle.

Overseas ground-breakingBoth Linglong and Prinx Chengshan held ground-breaking ceremonies for their plants, respectively in Serbia and Thailand in the last month. These have been well covered in the international media.

David Shaw

R E S E A R C H

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Thank you for your attention

David ShawCEO, TireIndustryResearch.com

[email protected]+44 208 647 1185+44 797 128 2336

R E S E A R C H

retreading and chinese tire makers · 2019. 6. 7. · doublestar ($770.5mn) guizhou tire ($769.3mn)...

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