(From the Sept. 5, 2011, issue of Rubber & Plastics News)
AKRON—Recession? What recession?
Led by billion-dollar investment commitments by Hankook Tire Co. Inc., Bridgestone Corp., Michelin and Goodyear, the global tire industry has announced nearly $9.7 billion in capacity expansions in the past 12 months, the highest one-year total on record.
That amount, edging past the $9.6 billion recorded in 2007-08, does not include an estimate for what Continental A.G. might spend on a greenfield tire plant it's planning to build in the U.S. That would add $500 million or more to the total, according to comparisons with other similar projects.
South Korea's Hankook tops the list this year with its commitment of $1.44 billion for new factories in China and Indonesia and a research and development center in South Korea.
Bridgestone checks in at No. 2 with $1.15 billion, including $135 million at its Aiken County, S.C., passenger tire plant. Michelin has committed $1.1 billion to new projects, including $250 million or so in the U.S.
Goodyear's billion-dollar commitment includes $500 million to convert its plant in Santiago, Chile, to higher value passenger tires.
Net increase in capacity
The industrywide investments cover 16 new plants and represent nearly 370,000 units of daily new tire capacity, including 325,000 units of consumer (passenger and SUV/light truck) tires, according to a Rubber & Plastics News' analysis of the available data.
This contrasts with three factory closings announced in the past 12 months, representing about 80,000 units of daily capacity.
Asia-Pacific accounts for nearly two-thirds of the budgeted investments, with Latin America getting $1.4 billion, or nearly 15 percent. Europe garnered a little more than $1 billion and North America is getting $921 million, although Conti's greenfield plant project is not part of that figure.
Among the major players, Hankook and Cheng Shin/¼Maxxis International devoted the most percentage-wise to capital expenditures in fiscal 2010, 16.2 and 14.3 percent, respectively.
As an industry, the major players devoted 6.4 percent of sales to capital spending projects last year, the analysis shows. At the lower end of the scale were Cooper Tire & Rubber Co. and Titan International Inc. at 3.3 percent.
In terms of spending on research and development, Continental topped the list at 5.6 percent, although spending by the firm's tire businesses was noticeably lower at 2.2 percent. Otherwise, Hankook's 3.5 percent of sales spent on R&D topped the list.
The industrywide average for the major tire makers was 2.5 percent.
Compilation of projects
Individually, new plants and major expansions announced in the past 12 months include:
Aeolus Tyre Co. Ltd. The Chinese company is building a passenger tire plant in Jiaozuo, Henan Province, reportedly capable of making 5 million tires a year.
Apollo Tyres Ltd. The Indian firm has boosted the size of the investment for a previously announced passenger and truck tire plant in India's Tamil Nadu province nearly sevenfold to $462 million. The plant was scheduled to start production of passenger radials last year and reach capacity of 100 metric tons per day by early 2011, then move up to 250 to 300 tons by 2012 and expand again to 400 tons by 2013.
Bridgestone Corp. has several projects under way, including:
— $70 million to expand its tire factory in San Jose, Costa Rica, by an undisclosed amount.
— $251 million to raise passenger tire capacity at two plants in China, to meet rising Chinese demand. The projects will add capacity for 12,900 units a day, Bridgestone said.
Individually, the firm will invest $163.7 million to boost daily capacity at its Tianjin passenger tire plant 53.3 percent to 25,300 units by July 2012, and $87.4 million to expand capacity at its seven-year-old Wuxi, China, passenger tire plant 33.6 percent to 16,300 tires a day by May 2012.
— $135 million to expand capacity at its Aiken County, S.C., passenger and light truck tire plant by up to 4,750 units per day before mid-2013, boosting daily output to 29,750 units by the second quarter of 2013.
— $239 million through January 2013 for the third-phase expansion of the company's off-the-road tire plant in Kitakyushu, Japan, designed to boost capacity 62 percent to 130 metric tons of rubber consumption a day.
— $255 million through 2014 to expand capacity for car and light truck tires at its Nong Khae, Thailand, tire plant 37 percent to 50,000 tires daily.
— $200 million through early 2014 to expand daily capacity at its Chonburi, Thailand, truck tire factory by more than 30 percent to 10,500 units.
Cheng Shin Rubber Co. Ltd./ Maxxis International. The Taiwan-based company is building two plants in China—in Xiamen and Chongqing—each capable of turning out 30,000 tires a day by 2012. Cheng Shin put the investment for the Xiamen plant at $300 million, but it did not disclose a value for the Chongqing factory.
CGS A.S. Holding. The Czech tire and rubber products maker is building agricultural tire facilities in Charles City, Iowa, and Holesov, Czech Republic, budgeting $67 million and $52 million, respectively, for the units.
The plant in Charles City—which will be operated by CGS' Mitas Tires North America Inc. (formerly CGS Tires U.S. Inc.) unit—should start producing in early 2012, while the one on Holesov should hit full production by 2014.
Continental. Several major projects in the past year were revealed by the German tire manufacturer:
— $320 million for a car and light truck tire plant in Kaluga, Russia. The 4 million tire-per-year plant should be on stream by year-end 2013.
— $210 million for the second-phase expansion of its car and truck tire plant in Camacari, Brazil, effectively doubling the size of the plant by 2015 to about 9 million car and 700,000 truck tires. The expanded output will serve both NAFTA and Latin America.
— $224 million to add 4 million units of annual passenger and light truck tire capacity at its Mount Vernon, Ill., tire plant by 2014. The project will create up to 444 jobs at the factory.
— $25 million to acquire India's Modi Tyres Co. Pvt. Ltd.—a Conti technical licensee for the past 37 years—as part of its “strategy to invest in growing markets in Asia for its core businesses.”
— An undisclosed sum to build the greenfield-site tire plant in the U.S. to cover rising demand in the NAFTA region.
Cooper Tire & Rubber Co. The U.S. firm spent $116.5 million to buy the 50-percent stake in the Cooper Kenda Tire Manufacturing (Kunshan) Co. Ltd. joint venture in China owned by Taiwan's Kenda Rubber Mfg. Co. Ltd. and roughly $22 million to raise its stake in its Mexican manufacturing venture Corporacion de Occidente S.A. de C.V.
Double Coin Holdings Ltd. The Chinese tire maker is building a $475 million passenger/light truck tire plant in Anhui Province designed to produce 15 million tires a year at full capacity. Michelin since has agreed to become a joint venture partner in the facility.
Goodyear. More than $1 billion has been budgeted by the U.S. tire firm to upgrade production at three plants, primarily to convert them to higher value-added tires, including:
— $500 million over five years to modernize its 33-year-old Santiago, Chile, factory and convert 7 million units of annual capacity to HVA capacity.
— $200 million over two years to convert 2 million units of annual capacity at the firm's Americana, Brazil, plant to HVA output.
— $100 million through 2013 to convert 2 million units of annual car tire capacity at its Pneumant Reifen & Gummi Werke GmbH subsidiary's factory in Riesa, Germany, to HVA output.
— Goodyear has begun trial production of passenger tires at its new Pulandian factory in Dalian, China—the company's first step toward replacing its existing factory in Dalian and doubling annual car tire capacity in China to more than 10 million units by 2015. The project is valued at $700 million over five years.
Hankook. Three key projects will get $1.44 billion in investments from the South Korean company:
— $353 million through 2014 for a car and truck tire plant near Bekasi, Indonesia. At full capacity the factory will produce 6 million tires a year, half of which will be exported to North America, Hankook said.
— $954 million through year-end 2015 for a car and truck tire plant in Liang Jiang Xin Qu, near Chong¼quing, China, capable of making 11.5 million car and medium truck/bus tires annually.
— $131 million through 2013 for a research and development center in Daejeon, South Korea, as part of a plan to expand and update its R&D capabilities.
Michelin. Five projects are on tap for investment:
— $1.46 billion for a car and truck tire plant in Shenyang, China, that at full capacity in 2014 will employ 1,500 and have annual capacity for 10 million car tires, 1.8 million truck tires and 295,000 retreads.
— $200 million over two years to boost capacity at the firm's passenger/light truck tire plant in Lexington, S.C., by an undisclosed amount.
— $135 million over six years to modernize its 45-year-old research-and-development complex in Ladoux, France, including razing most of the center's existing structures and replacing them with a 721,000-sq.-ft. facility.
— $50 million to upgrade equipment and expand production capacity at the company's Fort Wayne BFGoodrich Tire plant in Woodburn, Ind.
— $21 million through next year to expand car and light truck tire capacity at its Tigar Tyres D.O.O. subsidiary's Pirot, Serbia, plant 23 percent to 8 million units a year.
Nokian Tyres P.L.C. The Finland-based manufacturer will double its manufacturing presence in Russia in the coming three to four years by adding capacity for 5 million to 6 million tires at a plant to be built adjacent to its existing factory in Vsevolozhsk, Russia.
Pirelli. Capital spending by the Italian concern spans the globe:
— $210 million through 2013 for a car and light truck tire plant in Silao, Mexico. The 5 million-unit-a-year factory will support projected growth for high-performance tires in North America.
— $285 million through 2014 to upgrade the capabilities of and increase capacity at a number of plants in Russia it's taking over within the framework of a joint venture agreement with Russian partners Sibur Holding and Russian Technologies State Corp.
— $100 million over two years to boost capacity at its Merlo, Argentina, plant 20 percent to 6 million tires annually; the project includes doubling capacity for the higher value-added SUV and light truck sizes.
— An undisclosed sum to build a radial motorcycle tire plant in China that's slated for completion by next year.
Sumitomo Rubber Industries Ltd. The Japanese company is committing $345 million through late 2013 to build a consumer tire plant in Fazenda Rio Grande City, Brazil, in the coming two years, with a projected capacity of 15,000 car tires a day.
Toyo Tire & Rubber Co. Ltd. paid $155 million to buy Malaysian tire maker Silverstone Bhd., and the Japanese tire maker plans to invest $260 million over three to four years to build a car and light truck tire plant adjacent to Silversone's plant in Perak, Malaysia.
Toyo also bought a 75-percent ownership stake for $22 million in China's Shandong Silverstone Luhe Rubber & Tyre Co. Ltd.
China's Triangle Tyre Co. Ltd. has budgeted $388 million to add capacity for up to 2 million steel radial truck tires a year at the firm's plant in Weihai, China.
Japan's Yokohama Rubber Co. Ltd. is spending $600 million through 2017 to more than double the annual capacity of its car tire plant in Clark Freeport Zone, Phillippines, to 17 million tires.
The expansion will occur in three stages—to 10 million units by 2013 and to 13 million units by 2014—and includes the construction of a 3.23 million-sq.-ft. addition to Yokohama's 15-year-old plant there.
Yokohama also is spending $13 million through next summer at its Salem, Va., tire plant to expand capacity for car and light truck tires produced there.