The Changing Face of the Tyre Industry and Implications for the Synthetic Rubber Industry APIC 2014...

©LMC International, 2013 1 26/05/2014

The Changing Face of the Tyre Industry and Implications for the Synthetic Rubber Industry

APIC 2014

May 2014

Robert Simmons (Head of Tyre & Rubber Research) [email protected]

mailto:[email protected]


Overview

• Understanding the tyre market

• Vehicle sales (OE Tyre Sales)

• Replacement Tyre Sales

• Tyre Production

• Implications for the synthetic rubber industry


Drivers of Tyre Demand

Vehicle Sales

Vehicle Production

Scrapping rate/vehicle lifecycle

Vehicle Parc

No. of Tyres per Vehicle Replacement Ratio

OE Tyre Demand (LV 28% MHCV 21%)

Replacement Tyre Demand (LV 72% MHCV 79%)

Total Tyre Demand

Trade in Tyres

Production of Tyres


Tyre demand depends on vehicle ownership,

both for sales of new vehicles (OE tyre sales)

and replacement tyre sales. As incomes rise

so vehicle ownership increases.

IndiaIndonesia

China

Thailand

TurkeyBrazil

MexicoRussia Taiwan

Korea

Malaysia

UKJapan

Spain Germany

FranceItalyCanada

USA

0

100

200

300

400

500

600

700

800

900

1000

0 10,000 20,000 30,000 40,000 50,000 60,000

GDP per Capita

No o

f LV

per 1,0

00 p

op

ula

tion


Strong growth in emerging market GDP during

the 2000s encouraged vehicle ownership.

Advance economies are picking up in 2014, but

emerging markets are weak

-4%

-2%

0%

2%

4%

6%

8%

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

GD

P g

row

th

Advanced Emerging Advanced Emerging


This can be seen in new vehicle sales

-10% -5% 0% 5% 10% 15% 20%

WORLD

Asean

China

East Asia

Eastern Europe

India

NAFTA

South America

EU-27

Annual % change in LV vehicle sales

2012 2013 2014

38%


In the longer term, vehicle ownership levels

are low in the emerging markets

0

100

200

300

400

500

600

700

800

900

1,000

Nig

eria

India

Ph

ilipp

ines

Indo

nesia

Chin

aC

olo

mbia

Venezu

ela

Thaila

nd

WO

RLD

Turkey

Sou

th A

fric

aU

krain

eB

razil

Chile

Arg

entin

aR

om

an

iaM

exic

oTaiw

an

Russia

Hung

ary

Slo

vakia

Kore

aM

ala

ysia

Czech

Denm

ark

Sw

ed

en

Po

land

Belg

ium

/Lux

Neth

erla

nd

sIre

land

Po

rtug

al

Slo

venia

UK

Gre

ece

Sw

itzerla

nd

Jap

an

Sp

ain

Au

stria

Germ

any

Norw

ay

Fra

nce

Italy

Fin

lan

dC

an

ada

Au

stralia

New

Zeala

nd

USA

No. of LV

(p

er 1,0

00 p

op

ula

tion)


The growth of vehicle density follows an S-

curve.

0

100

200

300

400

500

600

700

800

900

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

Den

sity

(veh

icle

s p

er

1,0

00 p

op

ula

tion

)

Japan US UK


The emerging markets are entering the rapid

growth stage, developed markets are

approaching stagnation.

0

50

100

150

200

250

300

350

400

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Emer

ging

mar

ket d

ensi

ty

600

625

650

675

700

725

750

775

800

Western Europ

e Density

Brazil India Russia

China China (Urban) Western Europe


The same is true within China

0

50

100

150

200

250

0 20,000 40,000 60,000 80,000 100,000

GDP per capita (RMB)

Car

den

sit

y p

er

1,0

00 p

op

ula

tio

n

Fujian

Jiangsu

Zhejiang

Beijing

Tianjin

Shandong

Guangdong

Jiangsu

Zhejiang

Beijing

Tianjin

Shanghai

Guizhou

Tibet

Gansu

Yunnan


Growing incomes in emerging markets point to

strong emerging market demand for vehicles

(and OE tyres). Advanced market sales grow

modestly.

0

10

20

30

40

50

60

70

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Veh

icle

Sale

s (

mn

un

its)

Mature Emerging


• Number of vehicles on the road (vehicle parc)

• Vehicle use (incomes, fuel prices, economic activity)

• Road and weather conditions

• Type of tyre fitted (dependent upon legislation, tyre

labelling, individual preference)

• Retreading (raw material prices, economic activity)

Replacement tyre sales (the largest

component of demand) are determined by:


With growing vehicle sales, parc growth in recent years has been dominated by emerging markets.

0% 5% 10% 15% 20%

WORLD

ASEAN

Central Europe

China

East Asia

Eastern Europe

India

Middle East

NAFTA

Oceania

South America

Western Europe

Parc growth (5yr annual average)

LV MHCV


Emerging market vehicle sales build parc.

Developed market sales are mainly for parc

replacement

0

5

10

15

20

25

2000 2002 2004 2006 2008 2010 2012

Veh

icle

sale

s (m

n u

nit

s)

-

50

100

150

200

250

Veh

icle P

arc (m

n u

nits)

USA China USA Parc China Parc


Global replacement ratios began to recover

2013. However, the trend was not the same

across regions

90%

95%

100%

105%

110%

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

LV

rep

lacem

en

t ra

tio

240%

260%

280%

300%

320%

MH

CV

rep

lacem

en

t ratio

LV MHCV


The strongest growth was in Asia and the Americas.

-14% -12% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10%

WORLD

ASEAN

China

East Asia

E Europe

India

NAFTA

S America

EU

2012 2013


This reflects growth in the number of miles driven

2,500

2,600

2,700

2,800

2,900

3,000

3,100

3,200

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

0.70

1.20

1.70

2.20

2.70

3.20

3.70

4.20

Gaso

line p

rices (S

/gallo

n)

US miles driven US miles driven US gasoline price

Dis

tan

ce t

ravell

ed

(12 m

th a

vera

ge (

bn

mil

es)


85

90

95

100

105

110

115

120

125

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Dis

tan

ce d

riven

(2001 =

100)

UK (MHCV) UK (LV) France (All)

Miles driven are also picking up in Europe


As the light vehicle parc increases so do

replacement tyre sales. Almost all growth is in

emerging markets.

0

100

200

300

400

500

600

700

800

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Re

pla

ce

me

nt

Sa

les

(m

n u

nit

s)

Advanced Emerging


Emerging market demand is changing the tyre

industry as demand has risen strongly in these

markets

1,100

1,200

1,300

1,400

1,500

Wo

rld

Ch

ina

S.A

meric

a

AS

EA

N

Mid

dle

East

Ind

ia

E.E

uro

pe

Oth

er

E.A

sia

Eu

rop

e

N.A

meric

a

Wo

rldT

ota

l ty

res s

ale

s (

'000 u

nit

s)

Tyre sales growth 2004-13


In terms of production, greater volumes are

being traded. This is leading to a dislocation

between sales and production.

400

500

600

700

800

900

1,000

1998 2000 2002 2004 2006 2008 2010 2012

LV

exp

ort

s (m

illi

on

tyre

s)

40

47

54

61

68

75

82

MH

CV

exp

orts ('0

00 ty

res)

LV MHCV


North America and EU-27 are the largest net

importers …

-150

-125

-100

-75

-50

-25

0

25

50

75

100

125

NA

FTA

EU

-27

Oth

er E

uro

pe

E. A

sia

S. A

merica

M. E

ast

Oce

ania

ASEA

N

Chin

a

Ind

ia

Oth

er

LV

net Im

port

s (m

n u

nit

s)

Net Imports 2011 Net Imports 2000


Imports are largely for the replacement market, these reached close to record levels in 2013

20%

30%

40%

50%

60%

70%

80%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Imp

ort

s %

of re

pla

cem

en

t sa

les

US LV Imports % replacement US MHCV Imports % replacement

EU LV Imports % replacement EU MHCV Imports % replacement


Imports to the US grew strongly in 2013 with the ending of duties on Chinese imports

70

80

90

100

110

120

130

140

150

160

170

180

190

2001 2004 2007 2010 2013 2016

US L

igh

t V

eh

icle

Tyre

Im

po

rts (m

illi

on

s)

SAAR Moving Average Annual Forecast


Imports are dominated by low cost producers. Chinese imports dropped between 2010 and 2012 with the introduction of an import duty, but grew strongly in 2013. Total imports did not fall.

0

20

40

60

80

100

120

140

160

180

200

2005 2006 2007 2008 2009 2010 2011 2012 2013

Ch

ina

(%)

US

LV

Tyre

Im

po

rts (

Mil

lio

ns)

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Asean China East Asia Other NAFTA China %


US trade values shows the difference in price between imports and a US produced (exported) tyre. An imported Chinese tyre is half the price of a US exported tyre.

0

20

40

60

80

100

120

140

Taiw

an

Ch

ina

Vie

tnam

Ind

on

esia

Th

aila

nd

Co

sta

Ric

a

Ch

ile

Mexic

o

Ph

ilipp

ines

Ko

rea

Slo

vakia

Can

ad

a

Jap

an

Ru

ssia

Ro

man

ia

Bra

zil

Fra

nce

Italy

Po

rtug

al

UK

Germ

an

y

Hu

ng

ary

Czech

Tyre

un

it p

rice (

$)

Import unit values export unit values

2013


Combining sales with trade shows a strong increase in tyre production in emerging markets, while advanced market production has fallen

1,100

1,200

1,300

1,400

1,500

1,600

Wo

rld

Ch

ina

AS

EA

N

Ind

ia

E.A

sia

Mid

dle E

ast

E.E

uro

pe

S.A

merica

Oth

er

Eu

rop

e

N.A

merica

Wo

rldT

ota

l ty

res

sale

s ('0

00 u

nit

s)

Production growth 2004-13


Implications for synthetic rubber: tyre production and weight determine demand. Tyre sizes and hence weights are increasing

6

8

10

12

14

16

18

20

2000 2002 2004 2006 2008 2010 2012

LV

tyre

weig

ht

(kg

) m

a

30

35

40

45

50

55

60

M/H

CV

tyre

weig

ht (k

g) m

a

Car LCV MHCV


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2007 2008 2009 2010 2011 2012 2013

To

tal

14 15 16 17 18

OE tyre sizes are increasing (for example: EU)


As with the tyre industry, demand is growing strongly in emerging markets. Unlike in the tyre industry, much of this demand is met from advanced market exports

-800

-600

-400

-200

0

200

400

N A

meric

a

S A

meric

a

Eu

rop

e

E E

uro

pe

East A

sia

AS

EA

N

Ch

ina

Ind

ia

Oth

er

Net

imp

ort

s (

'000 t

on

nes)

SBR BR


However, capacity is increasing in the emerging

markets. This is placing pressure on exporters

0

50

100

150

200

250

300

350

2003 2005 2007 2009 2011 2013

Pro

du

cti

on

/im

po

rts (

'000 t

on

nes)

66%

69%

72%

75%

78%

81%

84%

87%

Self-s

uffic

ien

cy (%

)

Imports SBR

China SBR


For polybutadiene rubber, Chinese self

sufficiency is increasing, but capacity utilisation

has fallen

0

100

200

300

400

500

600

700

800

900

2000 2002 2004 2006 2008 2010 2012

Pro

du

cti

on

('0

00

to

nn

es

)

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

se

lf-su

fficie

nc

y/C

ap

ac

ity u

tilisa

tion

(%)

Production Capacity utilisation Self sufficiency

China BR


New capacity has also been commissioned in

other net importing regions (India and ASEAN)

0

50

100

150

200

250

300

350

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Net

imp

ort

s (

'000 t

on

nes)

ASEAN India

Net SBR imports


Changing raw materials:

pressure to reduce CO2 leads to demand for

low rolling resistance tyres. Starts with OE

80

100

120

140

160

180

200

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Gra

ms C

O2/k

m

EU average CO2 emissions


Tyre labelling enhances this across the tyre

spectrum. Demand is not static moving towards

different raw materials (sSBR, enhanced

sSBR,etc.)

GCFEFCEEECEBCCCBCABCBBBA

0

20

40

60

80

100

120

140

Rating (Rolling Resistance/Wet Grip)

List

Pri

ce (€

)

Budget Quality Premium

195/65/15/H


• The focus of vehicle and tyre demand growth is moving to the emerging markets

as incomes have risen.

• In 2014, demand from in many emerging markets has slowed, however, the

underlying story still holds. Demand is growing in the Advanced markets.

• In addition, tyre trade is increasing, with increasing volumes produced in low cost

countries and shipped to the advanced markets. This further encourages tyre

production in emerging markets.

• The focus of advanced market production is OE, the most technological advanced

tyres. Pressure to reduce CO2 emissions is leading to demand for new materials.

• Synthetic rubber capacity is increasing in emerging markets which is placing

pressure on exporters.

Conclusions


Thank You www.lmc.co.uk

Acknowledgments:

C:/../ADMIN/www.lmc.co.uk.htm


This presentation and its contents are to be held confidential by the client, and are not to be disclosed, in whole or in part, in

any manner, to a third party without the prior written consent of LMC International.

While LMC has endeavoured to ensure the accuracy of the data, estimates and forecasts contained in this presentation,

any decisions based on them (including those involving investment and planning) are at the client’s own risk.

LMC International can accept no liability regarding information analysis and forecasts contained in this presentation.

© LMC International, 2014

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The Changing Face of the Tyre Industry and Implications for the Synthetic Rubber Industry APIC 2014...

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