EU sanctions force Nokian to expedite U.S., Finland plant upgrades

NOKIA, Finland—The European Union has expanded its sanctions on Russia as a result of its war against Ukraine, which in turn has pushed Nokian Tyres P.L.C. to expedite its plans to increase capacity at its plants in Dayton, Tenn., and Nokia, Finland.

On April 8, the EU announced its fifth package of restrictive measures against Russia, including the ban of cement, rubber products, wood, spirits, liquor and seafood, as well as an anti-circumvention measure against potash imports from Belarus.

The ban also includes imports of Russian coal, access to Russian and Belarusian freight road operators and entry of Russian-flagged vessels to the EU, as well as export of products to Russia, covering quantum computing, advanced semiconductors, sensitive machinery, transportation and chemicals.

These measures cover trade worth nearly $6 billion (€5.5 billion) and "will also help to close loopholes between Russia and Belarus," according to the European Commission.

In a statement issued on April 11, Nokian said the EU sanctions will have a "significant impact" on Nokian's ability to manufacture tires in Russia as well as sell tires in Russia and in the EU, "specifically in Central Europe."

The Finnish tire maker said its goal is that all tires sold in Nordic countries will be manufactured in Nokia, while all tires sold in the U.S. will be manufactured in Tennessee or Nokia.

Nokian continues to operate its passenger tire plant in Vsevolozhsk, Russia, in an effort to thwart Russian efforts to nationalize manufacturing facilities there to retaliate against companies that pull out of the country.

Nokian said it has not sold tires to the Russian army, and that the Russian Federation is not a Nokian customer.

Earlier this month, Nokian said it was ramping up plans to build a second factory in Europe to replace the capacity at its 16-year-old plant in Russia.

To expedite those plans, management is eliminating the dividend payment this year and will re-allocate the $117 million it would have paid out to shareholders toward the construction of the new plant in Europe. Neither the site for the new plant, nor a timeline to name that site, has been disclosed.

According to Nokian, Russia represented approximately 20 percent of Nokian's net sales in 2021, and approximately 80 percent of Nokian's passenger tires were produced in Russia.

The company said that approximately half of the raw materials used for tires made in Russia come from outside of Russia. Nokian said the availability of raw materials, as well as difficult logistics, "will have a significant impact on the company's capability to continue production in Russia."

The EU sanctions will have no impact on Nokian's Heavy Tyres business unit, the company said, as all Nokian's heavy tires are produced in Finland. Nokian already terminated sales and distribution of heavy tires to Russia earlier this year.

Nokian said it will not provide any further information "on the subject at this point but will announce any material direct impacts as appropriate and in a timely manner."

Nokian is ranked No. 19 on Rubber News' most recent ranking of global tire makers with sales of around $1.40 billion.

Rubber News and European Rubber Journal staff contributed to this report.