DRAFT ERJ Machinery Survey 2019:  Robust under pressure

Major players upbeat, though headwinds stall last year’s recovery, ERJ’s Tire & Rubber Machinery Survey 2019 indicates

London - Given the market pressures that emerged during the year – international trade disputes, a cool-down in some tire markets and Brexit among them – the international tire & rubber machinery sector delivered quite a robust performance in 2018.

Figures from the 39 companies that completed the survey both this year and last year, show a sales total of $4,077.2 million, just 0.8% lower than a year ago.

On the other hand, 2018 brought an abrupt halt to the previous year’s bounce-back, when a similar like-for-like comparison in the survey recorded a 15.5% year-on-year increase in sales.

Sales for the 13 Chinese machinery makers that supplied figures for both surveys indicated a 12.3% year-on-year growth in combined turnover to $1.09 billion. This compared to growth of 19.0% recorded in our survey last year.

Interestingly, though, data provided by the Chinese Rubber Machinery Association (CRMA) also estimated total sales of Chinese rubber machinery at $1.40 billion in 2018, about 24% higher than a year ago.

Table toppers

There was a more settled look to the ranking by sales of the major tire & rubber machinery manufacturers after some jostling for top position over recent years.

HF Group emerged as clear leader, helped by 15.5% year-on-year growth in sales of tire & rubber machinery to $462.3 million for 2018.

This helped put some clear water between HF and closest rival VMI, which grew sales by 1.8% to $402.5 million.

At another major contender MESNAC sales of tire & rubber machinery grew by 6.0% to $274.1 million, CRMA figures show – MESNAC itself reporting 1.0% year-on-year sales growth for the group as a whole, to $402.5 million.

Another noteworthy performer was Tokyo-based Kobe Steel, which delivered growth of over 5% to $206.0 million despite challenges in its most important market China. (see below).

Business trends

Amid all the current woes besetting the global economy, business-confidence ratings among survey respondents matched those of last year, with plans for expansion, acquisition and/or plant-investments again running at high levels.

Asked to identify the fastest growing geographic market regions, there was a large degree of consistency between respondents’ replies across our 2019 and 2018 surveys.

This metric usually throws up significant variations from year to year, but our 2019 study mostly indicated only minor changes – slight improvements in ratings for western Europe, central/eastern Europe, North America and China.

An exception, though, was India, which was identified as one of the strongest-growing market regions by 62% of respondents – up from 46% in last year’s survey.

Survey ratings for the fastest growing industry-market sector, likewise, came in more-or-less unchanged this year, with steady showings by the tire, automotive parts, general rubber goods and engineered products sectors.

Manufacturers’ viewpoints

Feedback from leading machinery suppliers – both in interviews and written comments supplied for this year’s survey – reflect different degrees of uncertainty and optimism about the current direction-of-travel of their markets.

For its part, Pelmar Engineering said the market “now increasingly requires upgrading of existing equipment as part of brownfield projects, simultaneously with greenfield projects, which we expect to subside in the coming years.”

In comments for the ERJ survey, Pelmar added that it also foresees “major closures of plants in China, and several new projects in North America and India.”

All of the above trends “will have an impact on rubber machinery production, sales and building,” the Israeli group further commented in its statement.

Pelmar went on to note increased demand for specialised machinery and systems for improving working conditions and reducing emissions, as well as for automated weighing and feeding systems.

In its 2018 annual report, VMI parent group TKH noted higher earnings and profitability despite a “continued high proportion of engineering for clients among the top-five tire manufacturers.”

Indeed, the Dutch group added that the share of the top-five tire makers in VMI’s order intake increased further last year.

However, TKH reported order intake in China “at a low level and given the decline in capacity utilisation in the tire manufacturing industry in that country, we do not expect this situation to change in the coming year.”

At Marangoni Meccanica, new commercial director Luca Bonollo said “business is now going well especially in Europe and India. The [general] trend has been improving since early last year and has remained strong.”

Looking forward, however, Bonollo expects some market contraction from the middle of this year – reflecting a decline in the tire market during the final quarter of 2018.

“It is a question of our customers’ markets, which went down in the final quarter of 2018. So, I believe that investment for this year will go slightly down,” he explained to ERJ.

There remain, however, some high-growth markets for tire & rubber machinery suppliers.

Indian market

“Overall business looks good currently and for the next year in India,” summarised M.K. Suresh, joint general manager & head, marketing, customer service & testing at Larsen & Toubro (L&T).

Overseas, L&T is not seeing new investments – except in the OTR segment – but expects a pick-up over the next two years, according to the machinery company manager.

“The Indian tire industry has been investing in a number of greenfield and brownfield projects, catering to all the tire segments,” Suresh added in an interview at Tire Tech Expo 2019.

“We expect this growth and investment to pan out in the next financial year as well,” commented Suresh.

Much of the tire sector investment is being driven by India’s fast-growing passenger car industry, which currently produces about 3.5 million cars per year.

“The recent quarter did see a bit of [a decline in] growth in the passenger car segment,” noted Suresh. “Hopefully this is just a temporary phenomenon.”

After some years of decline, he added that India’s commercial vehicle market is delivering growth as high as 25% this year – albeit from a relatively low base.

There is also a lot of investment in new production of two-wheeler tires, for which India is the world’s largest market at about 16 million units/year.

Developments in China

At Kobe Steel, consolidated sales of rubber machinery edged up to $206 million in 2018, from $196 million the previous year.

“Frankly we expected a bigger increase,” said Naoaki Kimura, area general manager, Kobe Steel Group – noting, in particular, developments in the Chinese market.

Last year, he said, passenger car tire sales in China fell by 4.1% while truck/bus tire sales increased 5.1%. This resulted in an overall decline of 2.8% in that market.

“Demand for truck/bus tires related machines was okay, or above our expectations, but one year ago we expected more,” the Kobe Steel manager told ERJ.

Kimura went on to note increased investment by some Japanese tire makers, Bridgestone and Yokohama in particular, in part to strengthen their position in the Chinese OE market.

Annual production at Uzer Makina has increased from 60-70 presses in 2017 to 150 presses in 2018, reported marketing & business development engineer Mehmet Ak?n K?l?ç.

“This year, we are fully booked and we are taking orders for 2020,” he informed ERJ. “The market is still growing with the big players now investing.”

For example, K?l?ç said Indian tire makers “are investing a lot and looking to build new plants to increase capacity.

“Other customers are also investing, probably due to the Chinese situation and tariffs. I think tire makers are trying to expand capacity in other areas, including Europe.”

Uzer Makina, he added, is also following major new tire plant projects in Serbia, Saudi Arabia and Algeria.

On a roll

Nicola Fedele, international sales and marketing manager at Rodolfo Comerio gave an upbeat assessment for the rubber machinery side of the business – the company also supplies the PVC and flooring industries.

“2018 started a little bit slow but at the end of the year the market went up very, very rapidly,” said Fedele. ”Then, also at the beginning of 2019 we finalised many contracts.”

Regarding the Chinese market, he said that at the start of 2018, tire makers there were not ready to buy new machines as they had already invested heavily in previous years.

“But now doors are opening, and we finalised projects at the start of this year in China as well as in India and Europe,” said the Rodolfo Comerio manager.

“My prediction is that 2019 will be a [strong] year for Rodolfo,” concluded Fedele, pointing in particular to demand for the company’s newly patented, high-accuracy calendering technology.

Things may be slowing down in some markets but are picking up in several others, Paul Kapper, sales director, RJS Corp. said in an interview, also at Tire Tech Expo.

“So, there are some markets for example south east Asia and India, that are still very active,” he noted. “And we have projects in the US, which we are working on right now.”

And while, he said, recent trade disputes had impacted business in China, companies there are mostly expanding elsewhere in south east Asia countries including Vietnam and Thailand.

On the other hand, Kapper said: “I keep hearing that Europe is slowing. There is a lot of uncertainty.”

Asked about technology trends, the RJS executive said “what everyone is looking for now is automation and robotics.”