Covid-19 shut-downs

by David Shaw

Untitled Document

Tire plants close across Europe, Americas, India

Tire factories across the world are closing, albeit temporarily, as OE demand for tires plunges and the grip of the epidemic tight­ens (see map).

As this article was being finalised (31 March), we estimate that 90% of capacity is closed in Europe; at least 80% in North Amer­ica; 100% in India; 100% in South Africa; and 100% in Malaysia.

Japan’s first shut-down (Toyo) was announced on 30 March.

• Overall, out of 403 factories mapped (see p11) (excluding China)
• 206 are currently on temporary shut-down
• 132 we believe to be open
• 65 are unknown.
• The unknown plants tend to be the smaller and older factories, while the 206 on shut-down tend to be the larger ones operated by the international tire companies.

Although Thailand’s tire factories are still working, the govern­ment has declared a state of emergency, and local people suggest it is only a matter of time until tire factories there are asked to close as well.

While many factories in China have re-opened after their crisis, overall output is around 50% of nominal capacity, and falling, as export markets have dried up and production is reduced to serve mainly domestic markets.

Worldwide (including China), we estimate that well over half of global tire capacity is currently offline. Excluding China, we estimate that just over half of all tire factories are closed; with a few more on short-time working.

The announcements came like a fire-storm after vehicle makers on 18 March announced their own shut-downs.

Because most Tier-1 light tire factories in the high-cost countries of Europe and North America are designed to serve the car and light vehicle factories in those regions, closure of car factories has a direct and immediate impact on requirements for tires coming out of OE-oriented tire factories.

Replacement demand is mainly served by factories in relatively low-cost countries, such as India, China, Thailand, Russia, Roma­nia and elsewhere.

Having said that, the newer factories built by Asian manufactur­ers in Europe and North America serve both OE and replacement demand. Some of the super-premium products made by the tier-1 tire makers are also made in the high cost countries. Also, heavy truck tires also tends to be manufactured locally to meet regional demand.

In terms of national shut-downs:

• Indian government has closed all factories until 14 April
• South African government has closed factories until 14 April
• Malaysia has also closed all tire factories until April 14

Meanwhile, various companies have announced their own temporary shut-downs by region. Some are time-limited, but these limits may be extended. Full details are given in the stories on pp26-30:

• Bridgestone closed its factories in the Americas
• Bridgestone closed its plants in Béthune, France; Bari, Italy, as well as all plants in Russia, India and South Africa. Bridgestone’s Bilbao, Puente San Miguel and Burgos plants in Spain, Lanklaar plant in Belgium, Stargard and Poznan plants in Poland, and Tatabanya plant in Hungary will all be running at a reduced production capacity.
• Michelin closed its tire plants in Europe
• Michelin closed most of its factories in North America, but did not specify which would remain operational.
• Michelin brought forward the permanent closure of its Dun­dee, UK factory to March, from June 2020
• Goodyear closed its factories in Europe
• Goodyear closed its factories in the Americas
• Pirelli has closed all of its factories in Italy, the UK, Russia, and closed or reduced output from factories in other parts of Europe. Production at its plant in Rome, Georgia and its factories in Latin America are currently suspended.
• Continental announced that some factories would close; these include Sumter in Georgia, but the company did not specify which factories would close.
• Yokohama has announced closures in the Philippines and Mississippi
• Hankook closed factories in Hungary and the United States
• Cooper closed its factories in the Americas
• Cooper to close European factories for three weeks.
• Cheng Shin (Maxxis) closed its factory in India as part of the national lock-down
• Toyo said it was closing its factory in the US and its flagship plant in Sendai, Japan, in addition to the Malaysian factory, closed under national lock-down rules.
• Kumho has announced the closure of its plant in Georgia, US.
• Apollo-Vredestein said it will cease production of all but agricultural tires in Europe from 28 March.
• Nokian closed all its tire factories worldwide.
• Rosava closed both its factories in Ukraine until April 24. The company said on March 23 that one of its office staff had tested positive for the illness.

International Associations react
ETRMA issued a statement on 25 March saying, “The increas­ingly severe impact of the global COVID-19 pandemic on our societies and economy is unlike anything we have seen before. Health concerns, supply shortages, low demand and government measures have led the European tire industry to take decisive action.

Over the past week, many member companies of the European Tyre and Rubber Manufacturers Association (ETRMA) have announced the temporary closure of their European manu­facturing facilities. The impact goes beyond that: R&D facilities, other operational areas and retail networks, which are key to the industry’s future, are also affected. Due to the extensive econom­ic and human consequences of this crisis, ETRMA calls for con­structive dialogue on remedial measures and support schemes at both the EU and national level.”

The USTMA lobbied to have the industry defined as an essential industry, so that tire manufacturers can make operational deci­sions based on important factors including the ability to service critical customers and sectors that are needed to keep the U.S. economy moving.

Closures driven by changing demand
Tire makers face a sharp reduction in demand due to the closure of vehicle factories, combined with reduced driving and govern­ment restrictions on mass gatherings, as well as concern for em­ployees. This has led to a changing demand pattern, and driven the decision at most of the top tire makers to cease production, at least temporarily.

New maps show which factories are idled

Here at Tire Industry Research, we have been geo-locating all the tire factories in the world (outside China). Our maps are still being updated and corrected.

On the interactive versions of the global map (see box, right), you can zoom right in on each plant and use satellite view to see the size of the factory and street view to see the environs. We’re steadily adding meta-data on production, employees and invest­ments to each marker.

We have stitched together the different maps (below) to give a global overview of the current state of the tire industry.

• Markers in red indicate a plant we know to be temporarily closed.
• Markets in green show factories we know to be open, though some of them might be on short-time working.
• Markers in yellow indicate where we are unsure of the status of the factory. In the case of Continental, the company has given little guidance on which factories are closed. We know the plant in Sumter has been furloughed, and that the plants in Malaysia, India and South Africa are all closed, but the company has given little guidance on other factories. They are marked in yellow.

All tire factories in China can be thought of as operational.
Interactive versions of these maps can be seen at the following URLs. Viewers can select by company and tire type.

Americas:
https://www.easymapmaker.com/map/3fb62e74393661dba4eafe4261b8d399

EMIA
https://www.easymapmaker.com/map/d94f3fcd7402d7f3bb14ff6d5e893026

Far East
https://www.easymapmaker.com/map/ea3725fb7f62f0d2d42c33a2fc22d886

We think that some of the lack of clarity over which plants are closed or not, is down to internal decisions within tire makers trying to understand how demand has changed and how best to respond to the new demand patterns.

Perhaps surprisingly, most tire makers do not have good market intelligence systems that allow them to quickly understand rap­idly-changing demand patterns.

Furthermore, there is a genuine desire to help governments in their efforts to fight the disease by providing tires for ambulanc­es, oxygen delivery vehicles and urgent logistics services, as well as meet the remaining commercial demand.

Tire makers want to make these tires, but need to work out whether they can supply them from domestic factories, and ask workers to return to work; or whether to supply the products from overseas factories, in which case, some moulds and other equipment may need to be moved around the world.

Meanwhile in India, South Africa and some parts of SE Asia, gov­ernment restrictions have included tire factories in lock-downs designed to prevent the spread of the virus.

Trucking remains healthy in North America, but has reduced somewhat in Europe as the industrial chain slows rapidly. More importantly, the trucking pattern in Europe has shifted away from long-haul trucking in favor of regional trucking. That change appears not to have happened yet in North America. but is expected in the coming weeks.
There has been increased demand for regional-haul trucks to move goods from distribution centres to hospitals as well as supermarkets and other retail outlets in Europe and North America.

At the same time, last-mile delivery activities have increased dramatically as residents confined to their homes have ordered deliveries of food, meals, medicines and other products.

Consumer demand is holding up in North America where there are no Federal restrictions on travel. However, many private citi­zens have started working from home, and others have taken the decision to reduce travel (see chart below). As a result, passen­ger-miles seem to be slowing in the United States, but that varies significantly by State, as different legislatures adopt different advice to their residents.

By contrast, many countries in Europe have asked residents to remain in their homes, and have advised against private travel, with varying degrees of compulsion.

Most observers we spoke to believe that over the coming weeks, the reality of the epidemic will become clear in the United States, and as it does, the various legislatures will impose greater re­strictions on travel and long-distance trucking.

Article courtesy of: Tire Industry Research https://tireindustryresearch.com/