Conti gets Euro bank loan for Russian plant

ERJ staff report (TB)

Tire Business Staff Report

Moscow -- The European Bank for Reconstruction and Development (EBRD), citing the need to foster energy efficiency in Russian industry, has agreed to provide $116 million (Euro 90 million) in funding to Continental AG for the German firm's tyre plant being built in Kaluga, Russia.

The funding, in the form of an eight-year loan, will fund part of the cost of the $320 million plant, which Conti committed to build in 2011.

Construction on the plant started in November 2011, and it's expected to start production of summer and winter car and light truck tyres by year-end 2013. Annual capacity will be 4 million units in the first phase but will double "in the near future," Conti said at the plant's ground-breaking. Employment at start-up should be about 400, according to the tyre maker.

Kaluga is a city on the Oka River about 100 miles southwest of Moscow with more than 325 000 inhabitants. Vehicle makers Volkswagen A.G., Volvo A.B. and PSA Peugeot Citroen have assembly plants there.

The EBRD did not disclose the terms of the loan, which will be demoninated in Russian roubles.

In addition, the EBRD said it will support Continental and other tyre makers pushing for improved Russian waste recycling legislation that would give producers the right to organize the collection and recycling of old tyres.

The EBRD estimated the value of the Russian tyre market at more than $5 billion, based on 54 million units sold. Demand growth, however, is creating 1.1 million scrap tyres a year, for which there is no further use. Thus Russia accounts for a third of all the so-called "end-of-life" tyres created in Europe.

Only 10 percent of Russia's scrapped tyres are being recycled, the EBRD said, with the rest dumped in landfills.

By contrast, the recycling rate elsewhere throughout Europe is 84 percent, which includes the use of "tyre-derived fuel" in certain industrial uses, including cement kilns, steel mills, thermal power stations and pulp and paper mills.

This huge gap highlights the urgency of strengthening Russia's draft law on industrial and consumer waste to ensure it gives tyre producers the responsibility for waste management rather than relying on financial incentives to solve this growing problem, the bank said.

The EBRD also has supported Group Michelin and Nokian Tyres P.L.C. with tyre factory projects in Russia.

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