One door closes, another opens

In April 2010 Bridgestone closed the doors to its factory in Adelaide, marking the end of Australia’s domestic tyre manufacturing industry.

Senior IBISWorld analyst, Michael Wilson, says the fall of the industry was largely due to the price competition from manufacturers in Asia.

“The cost of producing tyres here [in Australia] is simply far higher than in Asia and the local demand hasn’t been high enough to make it viable any more,” Wilson told Manufacturers’ Monthly.

The analyst noted the following in a recent industry report he wrote based on tyre manufacturing in Australia: “The proportion of domestic tyre demand being fulfilled by imports is increasing. The key factor behind this trend is the existence of supplier contracts that give auto manufacturers the right to demand lower prices during the life of a supply contract and if these prices cannot be met, they will source from abroad.”

According to Wilson, the demise of the industry is also due to the creation of large and efficient rubber plants and tyre factories in Asia.

“The improvements and efficiency and scale of this sort of thing in Asia has driven the Australian manufacturers to the wall and further improvements are likely to bring more cost benefits for Australian consumers,” Wilson said.

“The more efficient they get in Asia, the Australian consumer should win.”

It is facilities such as German specialty chemicals group Lanxess’ new butyl rubber plant in Singapore to which Wilson refers.

The 100,000 tonne per annum facility on Jurong Island – the industrial hub of Singapore – will produce synthetic rubber primarily used in the innerliners and inntertubes for car, truck, bus and aircraft tyres.

Butyl rubber is a synthetic material characterised by high impermeability to air due to the properties of its raw materials: isobutene; and isoprene. The rubber is widely used in the manufacture of innerliners, the innermost layer of a tyre that prevents air from escaping.

In May 2010, Lanxess held an official ceremony in Singapore to mark the beginning of the rubber plant’s construction, which is said to require an investment of up to EUR 400m.

During an opening address Lanxess chief executive officer, Axel Heitmann, said the butyl rubber facility will be the most environmentally-friendly, efficient and technology-driven butyl production plant in the world.

According to Heitmann, the company will invest 10% of the plant’s total investment sum into modern technologies engineered to protect the environment.

New technologies are said to include: a manufacturing process which requires significantly less steam than other facilities; flue gas purification systems to break down chemical compounds and release lower volumes of greenhouse gases; and a wastewater treatment plant and closed circuits which will reduce half the amount of liquid discharge.

Heitmann claims the company is leading the industry in what is known as “green tyre technology”.

“Tyres made with Lanxess high performance rubber help to reduce energy loss as the tyres roll, providing approximately 4% improvement in highway fuel economy,” Heitmann said.

The company expects the new facility, which is due to start production in the first quarter of 2013, will meet the rising demands for butyl rubber in tyres, particularly among the growing middle classes in China and India.

Lanxess supplies its product to Bridgestone, Michelin, Goodyear and Hanover Tyres.

Butyl rubber is also used to manufacture protective clothing, stoppers for the pharmaceutical sector and chewing gum.

Leave a Reply