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R E S E A R C HIOM3-London - April 2016http://Sustainabletires.com Slide no 1 of 23Sustainability in the Tire & Rubber Industry by David Shaw
Sustainability in the Tire Industry
David ShawCEO
TireIndustryResearch.com
[email protected]+44 208 647 1185+44 797 128 2336
R E S E A R C HIOM3-London - April 2016http://Sustainabletires.com Slide no 2 of 23Sustainability in the Tire & Rubber Industry by David Shaw
AgendaOverview
What is Sustainability?How the Tire industry performs
NR industryPricesSupply and demandTire industry exposure to NR
Tire IndustrySpeciality - Commodity splitPricing & brands - comparison with ChinaImpact of labels
De-risking from NRChanging tread compoundsBio-sourcing & Circular economies
Conclusions
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Tire Industry Research News
Twitter @TireIndustry
Opinion, Commentary, Analysishttps://www.linkedin.com/today/author/7706927
Market ResearchSustainability in the Tire Industry 2016China Tire Industry 2015-2018China Tire Newsletter (Weekly)More coming in 2016
Conference planningTire technology -Hanover 2016VDI EuroTyre - Brussels Nov 2016
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What is Sustainability?
Financial Social
Environment
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What is Sustainability Ch
ange
& c
ompl
exity
Secu
rity
of s
uppl
y D
iffer
entia
tion
Dam
age
Lim
itatio
n
Pre-compliance Compliance Beyond compliance Integrated strategy Purpose & passion
Unilever, Kraft, Hersheys ,
Leading tire makers include Pirelli, Bridgestone, Nokian
Commitment
Few metrics if any, low transparency , use of issue specific standards/indexes e.g. Sedex, ILO, ETI
Mix of external best practice standards & ‘own’ standards and data to evidence achievements e.g. GRI + LeafTc
Quantitative
Qualitative
Extensive, company speci�c metrics integrated with financial reporting to international standards, audited
Bob Willard, The Next Sustainability Wave - 5 stages of sustainability
Source: AB Sustain, Tire Industry ResearchLess advanced tire makers
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What is Sustainability?
Social
Environment
Financial
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$1.0
$1.5
$2.0
$2.5
NMCE (India)SHFE (China)SGX (Singapore)TOCOM (Japan)
Mar AprMay 8 2015
June Jul Aug Sep Oct Nov Dec Jan2016
Feb
NR price to April 2016
$0
$1
$2
$3
$4
$5
$6
$7
$8
DNOSAJJMAMFJDNOSAJJMAMFJDNOSAJJMAMFJDNOSAJJMAMFJDNOSAJJMAMFJDNOSAJJMAMFJDNOSAJJMAMFJDNOSAJJMAMFJDNOSAJJMAMFJDNOSAJJMAMFJDNOSAJJMAMFJDNOSAJJMAMFJDN
20042005
20062007
20082009
20102011
20122013
20142015
Sour
ce:
Tire
Indu
stry
Rese
arch
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0
1000
2000
3000
4000
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6000
7000
8000 MEA
Korea
Japan
India
USA
Other Asia
EU-27
China2013 2014 2015 2016 2017 2018
15.11m tonnes
15.85m tonnes
16.45m tonnes
17.25m tonnes
18.07m tonnes
18.78m tonnes
Global tire production - growth
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0kt500kt
1000kt1500kt2000kt2500kt3000kt3500kt4000kt
Other
Amer
icas
BrazilUSA
Other
EMEA
Russia
EU-27
Other
Asia
Pacif
ic
Thaila
nd
Malays
ia
Indon
esia
Korea
India
Japan
China
Rubber consumption (NR) 2015
Sour
ce: I
RSG
and
Tire
Indu
stry
Rese
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0kt
500kt
1000kt
1500kt
2000kt
2500kt
3000kt
Other
Amer
icas
Brazil
USA
Other
EMEA
Russia
EU-27
Other
Asia
Pacif
ic
Thaila
nd
Malays
ia
Indon
esia
Korea
India
Japan
China
Rubber consumption (SR) 2015
Sour
ce:
IRSG
s an
d Ti
reIn
dust
ryRe
sear
ch
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Normal production
Projected demand
Actual production
Actual demand
2027
NR supply-demand projection
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Other
Sales/Mktg
R&D
Depreciation
Capex
Labour
Other Ingredients
Fabric
Chemicals
Fillers
SR
NR
China
India
Developed
Exposure to rubber price
Sour
ce:
Tire
Indu
stry
Rese
arch
2012 data
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Things that don’t workIntervention in the markets
Traders are always faster and smarterintervention is usually signalled
Promises to restrict tappingindividual smallholders ignore policy
Restricting exportsSmuggling is always possible
Subsidising farmersDepends on the implementationTends to subsidise traders
Price ‘stabilisation’ agreementsToo much international administration
Things that might workConsumers agree to pay more
Brave move by consumersRisks competitive disadvantageHow about price cuts when prices rise?
New applications(eg) road construction to restrict supply
‘Industrial’ pricingWill agreements hold at price extremes?
Direct, long-term agreementsIf supplier has something unique to offerrequires courage on both sides
Cut costs; improve efficiencyAutomation; better clones; Genomics
NR interventions - What to do?
R E S E A R C HIOM3-London - April 2016http://Sustainabletires.com Slide no 14 of 23Sustainability in the Tire & Rubber Industry by David Shaw
Around 150m CV tires made each yearEach contains up to 20 kg of NRPrice of NR is around $1/kg below cost of productionEach tyre represents a subsidy of $20 from producers to consumersTotal subsidy is $3000m per year at current prices
Tire makers want NR to be sustainableDiscussions of ‘Industrial Pricing’Tire makers want transparency and stability
De-Risking strategiesUsing SR tread technologyDeveloping alternatives - Guayule ; TKSDeveloping bio-sourced monomersDeveloping cicular economy - recycling
Effect of volatile NR prices on tires
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China now a good example of this Extreme segmentation between international and domestic players
Gives strength to international playersReinforced by OE fitments on major brand vehicles
Local players compete mainly on priceCustomers have little information on which to base buying deci-sions
Started in developed world with Price-mixWas a strategy to compete against greater imports of low-value tires
Now becoming significant strategic factorespecially in the high-end & foriegn-branded vehicles
Commodity - speciality split
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Carbon Disclosure Project
The Global Reporting Initiative
Dow Jones Sustainability Index
World Business Council for Sustainable Development
UN Global Compact
International Integrated Reporting Council
Sustainability Accounting Standards Board
Forest Stewardship Council
Sustainable Natural Rubber Initiative
Fair Rubber Association
ISO Standards ISO 9000:2015 Quality Management system
ISO 19011:2011 Audit standards
ISO 14001:2015 Environmental Management
ISO 14046:2014 Environmental Management –
Water Footprint – Principles, Requirements
and Guidelines
ISO 50001:2011 Energy Management
ISO 26000:2010 corporate social responsibility
Standards & Accreditations
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Germany - Label development
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185/60R15Dec 2015RR
185/60R15Dec 2015WG
185/60R15Jan 2013RR
185/60R15Jan 2013WG
R E S E A R C HIOM3-London - April 2016http://Sustainabletires.com Slide no 18 of 23Sustainability in the Tire & Rubber Industry by David Shaw
Car tires (SR):Michelin’s Green X in 1995S-SBR, Silica - SilaneSR suppliers are very responsiveLife, wet grip and rolling resist-anceFunctionalisation chemistryDistributed supply base
Truck tiresMostly NR treadsStrong need for long lifeRolling resistance more impor-tantRetreadability?Overloading?NR risks
De-Risking from NR-1Switching to SR treads
R E S E A R C HIOM3-London - April 2016http://Sustainabletires.com Slide no 19 of 23Sustainability in the Tire & Rubber Industry by David Shaw
Alternatives to NR
GuayuleDesert shrubGrown from seedsIntense genetic developmentlwhole plant converted to latex, biomass, resinsGrown & harvested on 18-month cycle
TKS (Kazakh Dandelion)Related to common dandelion, but less vigorous
- Issues with cross-contaminationGrown from seedsIntense genetic developmentRoots harvested for latexGrown & harvested on 6 - 12 month cycle
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Synthetic polyisopreneGoodyear-DuPontBridgestone-AjinomotoChina, Russia developing polyisoprene from synthetic sources
Bio-sourced butadieneGenomatica - VersalisLanzatechGlobal Bio-Energies
A range of different projects
Bio-monomers
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Recycling old tires into new tiresGranulation & De-vulcanisationMicro-grinding (Micronisation)Reclaim, high-tensile reclaimAim is to find a source for rubber if/when NR price accelerates
Biological processing of old tiresBio Butterfly (Michelin)
De-Risking from NR-4; Recycling
R E S E A R C HIOM3-London - April 2016http://Sustainabletires.com Slide no 22 of 23Sustainability in the Tire & Rubber Industry by David Shaw
NRPrices are not sustainableTire industry is taking pro-active action to de-riskNR community needs to listen to customers and respond to their needs
Global tire industryIncreasingly moving to commodity/speciality segmentationMarket insight is the key to mid-term profitChina dominates in volume, but not in profitability
Tire industry seeking to de-risk from NRDeveloping alternatives such as Guayule, TKSUsing car tire tech to develop SR-based truck tire tread compoundsCircular economy becoming high priority in consuming marketsUse of recycled materials likely to increase
Conclusions & Take-Aways
R E S E A R C HIOM3-London - April 2016http://Sustainabletires.com Slide no 23 of 23Sustainability in the Tire & Rubber Industry by David Shaw
Thank you for your attentionDavid Shaw
CEO, [email protected]
+44 208 647 1185+44 797 128 2336
R E S E A R C H