Feature: Rubber machinery makers adapt to a new order

Feature published in the March/April issue of ERJ

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.

Even China’s largest tire machinery maker and smart factory pioneer Mesnac reported a 15-percent sales-drop in its preliminary results for 2015. This was despite the company having a well-developed overseas sales strategy.

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 is likely to have at least got close to this 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.” Mesnac vice president Karol Vanko told ERJ in an interview at the recent Tire Technology Expo (TTE) in Hanover, Germany.

“Sales in China are in a very bad situation,“ continued Vanko. “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 US, 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 is now focusing more on developing new projects in overseas countries including the US, 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,” said Vanko. “What is different is that we have more important strategic customers, from the top 10, let’s say.

“This is not time to get bigger and bigger: it is time for providing some very precise machines and fulfiling the requirements of the top customers.”

The Mesnac boss went on to identify 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.

“This is a very interesting chance for machinery makers,” said Vanko. “We can provide the R&D, the production and the service. This is the way we would like to go.”

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 modernisation.”

Vanko went on to emphasise that the smart factory project remained Mesnac’s number 1 priority. The company, he said, is continuing to develop integrated automation technology for every stage of tire manufacture, from mixing and testing through to handling and storage.

The concept, he said, is now 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 now has projects that show the savings that can be made in terms of people, operating costs and footprint on the factory floor.

Efficiencies include optimising processes such as pre-processing polymers and transfer to the mixer, combining polymers according to viscosity and filling the mixer automatically without an operator, the Mesnac VP said.

Another Chinese machinery maker Tianjin Saixiang Technology Co. Ltd (TST), meanwhile, pegged its 2015 annual sales at 362 million yuan (€50 million), down by 51 percent from 2014. The company saw a €13 million net loss last year compared to €7 million net profit in 2014, according to its statement in February.

Languid market

The statement attributed the slide to a languid market in both China and overseas. TST’s total assets also dropped by 3 percent to €238 million.

Zhang Jiliang, vice general manager of TST said that 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 south east Asia, suggested Zhang, citing the examples of Qingdao Sentury Tire Co Ltd and Shandong Linglong Tire Co Ltd, which have new facilities in Thailand.

TST is also looking to further develop its relationships with Western tire manufacturers: the Tianjin-based company is already involved in a project with Continental in the OTR tire sector.

“With this type of co-operation we can learn how Western tire makers are thinking,” said Zhang.

Impact in India

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 US imposition of 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 US, they (tires from China) started landing in India, so the Indian tire industry is affected,” he said in an interview with ERJ.

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

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

Asked about the likelihood of counter measures, 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.

“Today it is not showing up in the financial results of the tire makers. But in the coming months they will start passing on the 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.

“Once you are diversified into more geographies you always find demand somewhere,” said Arul. “We have been able to keep our heads well above water for some time because we export to over 40 countries.”

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

The company, he added, continues to benefit from the joint venture formed four years ago with Kobelco of Japan. This has given L&T access to in-demand technologies, including in the silica mixing arena.

“We have products that can handle silica very well: machines that are established in market that can handle very high levels of silica,” said Arul.

L&T is predominantly a supplier of tangential mixers, Arul saying that while some tire makers prefer intermeshing technology, this was more to do with customer preference than actual silica-mixing capabilities.

“That has been our experience and Kobelco’s experience. So nearly all their customers, who are among the world’s top 10 tire makers are using tangential mixers for high-silica compounds,” he added.

Strong growth in Turkey

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

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

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

Uzer Makina’s bosses are hopeful that the relationships built up with major tire makers in Turkey, will also help broaden the company’s market-reach. The €27-million turnover business already supplies container mechanisms, tire moulds and bladder moulds on a world-wide basis.

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

A particular opportunity is in the US, with Sumitomo, Bozkurt noting: “They have ended their agreement with Goodyear and one of the tire plants in the US belongs to Sumitomo. They have mentioned that they are looking at some renewal projects for the existing presses and they may prefer our presses.”

This will require some overseas investment by the Turkish machinery maker, Bozkurt explaining: “For curing presses you should have service facilities near the customer. It is necessary because some of our customers are pushing us to build some presses for the US. For this reason we should create a base for after-sales service.”

In response to the growing market demand, Uzer Makina is increasing its capacity: last year adding a new production hall and this year installing five new CNC machines, at a total investment of around €2.5 million.

There are also plans to introduce casting operations in to the tire moulds business, which only produces moulds by direct engraving.

“Both processes have advantages,” explained Kiliç. “But if there are a lot of sipes, especially winter tires, it is a bit difficult to make the moulds by direct engraving. So in the case of winter tires we prefer casting [which] we outsource to particular companies.”

On a roll in Italy

Another machinery manufacturer on the up is Solbiate, Italy-based Rodolfo Comerio, which is expanding its operations, having recently secured a series of new projects – including one to manufacture two of the biggest calenders in the world.

The north Italy-based 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 10,000 square metre unit is expected to total around €5 million and increase the company’s workforce to 130 people – from around 100 at present.

Alongside the expansion, the company said its R&D department is finalising a 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.

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

The technology, added Fedele, can be used for all kind 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.

The specified dimensions include: 870mm rolls diameter, 5,000mm rolls working width, 8m length of each roll including its journals, 30-tonne total weight of each roll. The calenders will be able to produce materials of less than 80µm thickness.

While the market in China “at this moment is stopped,” Fedele said sales in North America were strong, though mainly for PVC.

“We have three other projects for 2016 for conveyor belts and now we have seven projects for tire production in Europe,” added the Rodolfo Comerio sales manager.

MHI weighs in

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

Rubber-compounding is at the core of the tire-making process and manufacturers are loath to make any changes to their chosen mixing technologies – not least because it would require them to change out 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 up over many years as a supplier of intermeshing mixers to non-tire rubber companies, including Mitsuboshi, Nishikawa, Tokai Rubber and Toyoda Gosai.

“We were a latecomer in the mixing area,” explained Jun Umemura, deputy manager, rubber & tire machinery sales & marketing section, Rubber & Tyre division at MHI. “We started making mixers that Kobelco – the largest rubber machinery maker in Japan – does not [focus on], which means intermeshing.

“But as tire makers do not usually buy equipment from a company without references we started with non-tire companies.”

But the recent trend towards low rolling-resistance tires employing high-silica tread compounds has created an opening in the tire market for MHI, particularly in Asia.

While tire makers in Europe, such as Michelin, Continental and Pirelli, largely switched to intermeshing mixers many years ago, tangential mixers have remained the technology of choice for Asian companies such as Bridgestone, Sumitomo, Yokohama and Nexen.

But the growing use of silica compounds means things are changing, according to Umemura, who said that intermeshing designs theoretically allow better dispersion of the filler throughout the rubber compound.

Another advantage, he said, is better cooling, which allows processors better control over the temperature-sensitive reaction between the rubber and the silica-silane coupling agent systems.

“For a company, such as Bridgestone, which uses silica in all its tires, it would make sense for them to change to intermeshing,” said Umemura. “They are used to using the Banbury, for which Kobelco is the king in Asia. But since Kobelco is not so [specialised in] intermeshing, it is a very good business chance for us.”

MHI is now selling its mixer to tire customers and has many references for machines now in [operation], said Umemura, who commented: “We are getting good feedback from these customers. Hopefully we can sell more in Asia and [eventually] in Europe.”