Rubber machinery makers adapting to difficult market

The market for rubber and tire machinery is in a state of flux, driven partly by developments in China, where many locally based equipment manufacturers have reported a steep drop in sales in 2015 compared to the previous year.

The trend included significant year-on-year sales declines at three of the largest Chinese manufacturers: Yiyang Rubber & Plastics (down 16 percent); Dalian R&P Machines (down 18 percent); and Safe-run Machinery (down 14.4 percent). Based on figures from the China Rubber Manufacturers Association, these declines largely are related to U.S. antidumping and countervailing duties on Chinese tire imports.

Even China's largest tire machinery maker and smart factory pioneer Mesnac reported a 20 percent sales drop in its preliminary results for 2015.

As little as a year ago, Mesnac was aiming to increase overseas business from around 40 percent to 50 percent of sales overall. This year, the company likely will get close to the goal—though not as it had intended.

The percentage of Mesnac's sales outside of China “is rising more quickly than we expected, but not the way we wanted,” Karol Vanko, Mesnac vice president, said at the recent Tire Technology Expo in Hanover, Germany.

“Sales in China are in a very bad situation,” Vanko said. “It is not a secret that, generally, the tire market in China is (experiencing) decreases, very deep decreases, because of (the loss of sales in) the U.S., and because of (declines in) Russian and European markets.”

The Chinese proportion of business has dropped significantly for all equipment suppliers, including overseas players with customers in China, he also pointed out.

In response, Mesnac now is focusing more on developing new projects in overseas countries including the U.S., Brazil and Mexico. Another target is Iran, now that sanctions have been lifted.

“We have customers all over the world, and this number is increasing,” Vanko said. “What is different is we have more important strategic customers, from the top 10. This is not time to get bigger and bigger; it is time for providing some very precise machines and fulfilling the requirements of the top customers.”

The Mesnac executive identified some helpful trends in the market, including a shift by tire makers from making their own tire-building equipment to purchasing it from outside manufacturers.

Another positive, he said, is the tire industry's current drive to use more silica in its rubber compounds: “This new trend in the construction of the tire helps us to be more active in the mixing area. Companies are starting to invest more in the mixing area and looking at modernization.”

Vanko emphasized that the smart factory project remained Mesnac's top priority. The company, he said, is continuing to develop integrated automation technology for every stage of tire manufacturing, from mixing and testing to handling and storage.

The concept, he said, is starting to interest “even the most conservative customers in the tire sector, who never talked about it before.” This is, in part, because the company projects that savings can be made in terms of people, operating costs and footprint on the factory floor.

Another Chinese machinery maker, Tianjin Saixiang Technology Co. Ltd., pegged its 2015 annual sales at $56 million, down 58 percent from 2014. The company had a $14.6 million net loss last year compared to $7.85 million net profit in 2014, according to its February financials.

The firm attributed the slide to a languid market in both China and overseas. TST's total assets also dropped by 3 percent to $267 million.

Zhang Jiliang, vice general manager of TST, said the industry in China faced some major challenges, and that Chinese tire manufacturers must develop new strategies for the future.

This could include setting up tire plants abroad, for example in Southeast Asia, suggested Zhang, citing the examples of Qingdao Sentury Tire Co. Ltd. and Shandong Linglong Tire Co. Ltd, which have new facilities in Thailand.

“If the strategy is to move, TST will follow these companies and support their long-term strategies,” the executive said.

TST is looking to develop relationships further with Western tire manufacturers. The Tianjin-based company is involved in a project with Continental in the off-road tire sector.

Tire imports, particularly from China, are affecting demand for machinery in the Indian tire industry, according to officials of L&T Rubber Processing Machinery, part of Larsen and Toubro Ltd.

The downward sales trend started soon after the U.S. imposed tariffs on Chinese tire imports, according to S.A. Srinivasan, head of the Chennai-based L&T rubber processing machinery unit, a supplier of presses, tire building machines and mixers.

“Instead of going to the U.S., (tires from China) started landing in India, so the Indian tire industry is affected,” he said.

The cost-sensitive nature of the Indian market exacerbates the problem, where cheaper imports are welcome more widely than, say, in Europe.

“If you get a cheaper option, people jump at that,” the L&T executive said.

Asked about the likelihood of countermeasures, S. Arul, chief executive, L&T Kobelco Machinery, said Indian government officials had first to confirm that there was real injury to the domestic tire industry and that this would take time.

“The Indian tire makers are operating significantly below capacity, but they are not yet finding it so bad in terms of profitability due to lower input costs,” he said. “But going forward, I am sure they will find it difficult.

“Today it is not showing up in the financial results of the tire makers. But in the coming months, they will start passing on benefits of lower raw material costs, so eventually it will hit their profits. Also, they must be cutting down prices to compete with the Chinese.”

Overseas sales have cushioned L&T from the full impact of the domestic market downturn: Around 40-45 percent of the rubber machinery maker's sales are outside of India.

Asked about prospects for the next 12 months, Arul said: “We are seeing markets improving all around, though at a slow pace. So when demand picks up, that should help us.”

As well as the four established tire plants in Turkey—owned by Bridgestone, Goodyear, Pirelli and Petlas—last year Sumitomo opened a new tire plant in the country, while Bridgestone is scheduled to open a second plant in 2017.

“This will be a driving force for us to increase our capacity,” said Ahmet Kilic, marketing sales director of Uzer Makina. His company will supply more than 100 sets of presses to Sumitomo's new plant in Turkey.

Uzer Makina has steadily built its curing press business outside of Turkey, for example in Italy, Spain, the Netherlands, Czech Republic, Hungary, China and Iran.

“Our target is to increase this circle further to include supplying curing presses to the U.S.,” said Seyfullah Bozkurt, managing director of the Kocaeli, a Turkey-based tire machinery maker.

Uzer Makina's bosses hope the relationships built up with major tire makers in Turkey also will help broaden the company's market reach. The business with $37.7 million in sales already supplies container mechanisms, tire molds and bladder molds globally.

“I am sure this will develop in other locations as with Bridgestone, for example. Sumitomo will be the same. We will deliver presses or molds to the U.S., Brazil and South Africa as well, and maybe to Thailand and Japan,” Kilic said.

A particular opportunity is in the U.S., with Sumitomo. Bozkurt said, with the firm having ended its agreement with Goodyear, and one of the tire plants in the U.S. belongs to Sumitomo.

Another opportunity is in India, where Uzer Makina can supply presses for a new MRF plant in Trichy, according to Kilic. The tire maker, he said, is buying one or two presses from different suppliers and then will decide what to do.

In response to the growing market demand, Uzer Makina is increasing capacity. Last year it added a new production hall, and this year it is installing five new CNC machines, at a total investment of around $2.8 million.

Another machinery manufacturer experiencing success is Solbiate, Italy-based Rodolfo Comerio, which is expanding. It recently secured a series of new projects, including one to manufacture two of the biggest calenders in the world.

The company is planning to build a second plant to support new projects commissioned in early 2016, combined with those from last year. The investment in the new 108,000-sq.-ft. unit is expected to total around $5.6 million and increase the company's work force to 130, from around 100.

Alongside the expansion, the company said its research and development department is finalizing new calendering technology, intended for tire production and other rubber and PVC applications.

“This new technology will be a complete revolution in the calendering sector,” the Italian company stated.

Nicola Fedele, Rodolfo Comerio sales manager, said the new technology enables processors to achieve new levels of performance and accuracy.

The technology, added Fedele, can be used for all kinds of plastics and rubber calendering applications, including for tire production. It is being used on a current project to build two of the largest calenders ever seen in the world: one with four rolls and another with five rolls.

In Japan, Mitsubishi Heavy Industries Ltd., well established as a supplier of curing presses, testing and other tire and rubber equipment, is trying to carve out a new position as a supplier of intermeshing mixers for the tire industry.

Rubber compounding is at the core of the tire making process, and manufacturers are loathe to make any changes to their chosen mixing technologies—in part because it would require them to change recipes and possibly even the way they manufacture tires.

About five years ago, however, Hiroshima-based MHI developed a new rotor for the tire industry. The design is based on experience built over many years as a supplier of intermeshing mixers to non-tire rubber companies, including Mitsuboshi, Nishikawa, Tokai Rubber and Toyoda Gosei.

“We were a latecomer in the mixing area,” said Jun Umemura, a sales and marketing executive at MHI. “We started making mixers that Kobelco, the largest rubber machinery maker in Japan, does not (focus on), which means intermeshing.

“Tire makers do not usually buy equipment from a company without references.”