Raw material prices wreak havoc

Vol. 9
No. 1 / 2011
www.cgs.eu
A q ua r t e r ly n e w s l e t t e r f o r c us t o me r s , d i s t r i bu t o r s a n d f r i e n ds o f C G S G r o u p
Raw material prices
wreak havoc
Increased
demand for
CGS Tyres
Calls of “no cheap rubber” resonate across the world from Asia to Europe.
Price fluctuations of raw materials make any predictions obsolete even before
they are made. The natural volatility of commodity markets, unprecedented demand for rubber from China and under-stocked factories are the most frequently cited reasons for the current spike in raw material prices. Corespondingly, all
major tyre producers have increased their prices.
An increased demand for tyres in agricultural
and industrial segments marked the latter
part of 2010. CGS Tyres incurred sales of
more than 300 million euros which is comparable to the record-breaking year 2008.
“Last year was a springboard for our further development,” Mitas CEO Jaroslav Čechura said. “I have positive expectations about
our performance in 2011. The upcoming year
will be marked by volatility in raw material
markets.”
The global financial crisis seems to be over,
but there have been other events that have
caused stress and increased volatility in commodity markets, for example, the situation
in the Maghreb and the Middle East, and the
March earthquake in Japan.
In 2010, CGS Tyres, which comprises mainly Mitas factories, Rumaguma and sales
subsidiaries, sold the most tyres in Europe.
In Western Europe, the volume of sales was
59 percent. Eastern Europe and the Czech
Republic represented 27 percent of sales. In
North America and Mexico, CGS Tyres exported tyres worth about 6 percent of its sales.
The rest of sales were accounted for by Russia
and the rest of Latin America. [SE]
Tapping hevea brasiliensis, Ivory Coast.
Photo by Jiří Brejcha, 2008.
In February, tyre production was affected by
increasing prices of rubber, but over the past
six to 12 months, the prices of all key tyre
components have risen, be they natural or
synthetic rubber, carbon black or cord. In a
year-on-year comparison, the market price
of natural rubber has increased 60 to 75 percent. Other commodities have followed suit;
for example, synthetic rubber now sells for
twice as much as it did a year ago. The reasons are difficult to pinpoint.
“In 2009, most raw material producers
limited their production capacity, and many
plants closed,” explains Jana Dřízalová, CGS
procurement director. “Now, the demand for
tyres has increased, and this results in a surge
in demand for raw materials.”
“The financial crisis of 2009 led many companies to decrease their stock of raw materials in order to improve cash flow. In some cases, plants depleted their stocks 60 percent
or more off the 2008 stock levels,” Dřízalová
says. This adds to the volatility as suppliers
offer raw materials only for short-term deliveries. “Few producers were left with a comfy
cushion.”
Then there is the effect of the natural rubber “wintering season” (currently running
in Asia): during the wintering season, latex
cannot be harvested. In addition, the European Union has banned trading with the Ivory
Coast, which is on the verge of civil war. The
Ivory Coast is one of the world’s natural rubber producers.
“I expect raw material prices will remain
at very high levels through September,”
Dřízalová estimates. “It is impossible to insure
against commodity price fluctuations.”
The recent REACH legislation creates additional stress for raw material prices. NonEuropean commodity manufacturers cannot
sell their products to European tyre factories
unless they comply with REACH. “All commodities purchased by CGS comply with
European legislation,” Dřízalová says. [SE]
5.8
1.4
5.5
12.3
1.4
15.1
in %
58.6
Czech Republic
Western Europe
Eastern Europe
Russia
North America, Mexico
Latin America (excl. Mexico)
Africa, Asia, Australia
CGS NEWS | Vol. 9 | No. 1 / 2011 | Page 1
events
...Esto es África...
Rubber air spring bellows RUBENA 380 x 2
installed on the Tatra truck of Tomáš Tomeček –
rear axle.
Photo by Rubena 2010.
first used as the finishing point for an extreme cross-country race back in 1978 when the
first Dakar Rally was held. This year saw the
third Africa Eco Race since the event’s revival.
The route leads through demanding terrain in
Morocco, Mauretania and Senegal.
“Africa is an ideal ground for testing the reliability of Rubena air spring bellows,” said Petr Holeček, marketing manager of the bellows producing division. Rubena tests these products
in-house and at extreme motor sports events.
The Tatra truck was driven by Tomáš Tomeček
and navigated by Vojtěch Morávek. The truck
finished fifth. The Tatra team was also equipped with Rubena lift bags in case the truck
became trapped in sand dunes and needed to
be pulled out quickly or to enable the team to
carry out maintenance and repairs.
Dam made of rubber
Rubber air spring bellows
Ever wondered what eliminates vibration and
shock in vehicles and industrial applications?
The Tatra team that took part in this year’s
Africa Eco Race rode a Tatra 815 4x4 truck
equipped with Rubena pneumatic suspension
bellows. The Senegalese city of Dakar was
VW to Rubena: an A
Rudolf Peca
director of Rubena
The Volkswagen holding
has awarded an A to
Rubena a.s. after an audit conducted at Rubena
in February 2011. The
Skoda/VW auditors assessed Rubena’s compliance with VW Holding requirements described
in “Formel Q-Capability” supplier assessment
guidelines. Rubena’s rubber production complied at the level of 92 % which makes Rubena
a top-quality supplier to VW holding.
“The assessment by the VW holding opens
up new opportunities for Rubena,” said Rudolf Peca, Rubena CEO. “VW highly praised
Rubena’s core business, the Sealing and Antivibration Solutions division.” The auditors reviewed Rubena’s research and development,
procurement, production, quality control and
logistics. “Rubena has been investing in improving these processes,” Peca added.
In 2010, Rubena sales topped the prefinancial crisis levels of 2008. [SI]
CGS NEWS | Vol. 9 | No. 1 / 2011 | Page 2
In 2010, Rubena supplied two inflatable dams
to Algeria – the company’s first-ever contract
in Africa. The dams are being used to create
a self-regulating reservoir of water on the
Sebgad River to irrigate agricultural land. The
structure is 50 metres wide and 3 metres
high, and will hold more than 5 million cubic
Rubber Dam RUBENA 2 x 25 m (length) x 3 m
(height), Sebgag River, Algeria. 2010.
Photo by Rubena
metres of water without any negative environmental effects and minimal impact on the
landscape.
“Rubena is the world leader in rubber textile
products,” Holeček added. “Inflatable dams
can help Africans manage and control water
supplies. Rubena dams provide a modern,
mobile and automatic solution to raising water levels. They are easy to install and cost
much less than conventional dams to build
and maintain.”
The Rubena rubber dam that has been the
longest in operation was installed in 1963
in Žerotice in the Czech Republic. Currently, there are 120 Rubena dams installed in
Austria, the Czech Republic, Germany, Norway,
Poland, Slovakia and Slovenia. [SI]
SICO Rubena expands production
SICO Rubena, a member of CGS Holding, is
about to finish constructing a new production
floor located in Velké Poříčí, Czech Republic.
The expansion is 3,400 square metres, and
the construction will be finished by May. Then
the technology will be installed, and production will start in Q3 2011.
“The demand for our products is increasing,” said Erik Fulka, the plant’s director. “In
terms of space, the expansion is nearly 50
percent of the existing production area.”
The new space will house 80 to 90 employees and is intended for example for five extru-
ding lines and the machinery for producing
silicone-textile hoses. In addition, SICO Rubena plans to install a testing unit for silicone-textile components and a controlled-environment unit of 300 square metres for producing
high-quality silicone profiles.
SICO Rubena produces silicone rubber products that provide improved high-temperature resistance in comparison with common
rubbers, and feature better outdoor ageing
resistance and ultra-violet ray resistance. The
products comply with stringent health protection requirements. [SI]
events
Buzuluk to supply Mitas U. S. plant
Three-roll calender line for Fenner.
Photo by Buzuluk.
Like most manufacturers of machinery for the
rubber industry, Buzuluk has benefited from
the recent upsurge in demand. One of the company’s most important projects this year is the
contract to supply machinery for the new Mitas
plant in Iowa, USA. Buzuluk is supplying a total
of three assemblies. One is a calender line with
a three-roll calender for producing sheets and
rubberizing textile cord, plus a twin-cylinder
unit for heating and supplying compound.
The second assembly is a profiling unit
with a small four-roll calender, and the third is
a doubling unit for bonding rubber and cord
layers. Several other smaller-scale orders for
the U.S. operation are currently at the planning stage. Buzuluk will provide a special
service for the Iowa plant: Instead of merely
supervising the installation (the standard procedure for most clients), Buzuluk technicians
will carry out the complete installation process onsite. This ‘turn-key installation’ takes
full advantage of Buzuluk’s wealth of experience and the excellent reputation of its fitting
teams. The Iowa equipment is a combination
of reconditioned machinery and brand-new
units. The key machinery will be reconditioned
– both calenders and both twin-cylinders plus
some of the conveyer belts. All of these machines were originally manufactured by Buzuluk,
and the fact that they can be reused in this
way speaks volumes about the high quality
and durability of the products. These machines will be dismantled, cleaned, repaired and
fitted with new parts where necessary. The reconditioning process involves a complete refit
of the machine wiring, new motors and new
safety features.
The other parts of the calender lines and
the doubling unit will be new. All of the machinery will comply fully with applicable
U.S. safety standards and regulations. In
addition to the Iowa contract, Buzuluk will
be carrying out a range of smaller-scale
orders for its sister companies, repairing
and modernising equipment at various
production facilities. These orders include
the replacement of kneading chambers in
Prague, Náchod and Zlín, the installation of
a new sheet cooler at the Rumaguma plant
in Serbia and various repairs to cylinders and
supplies of replacement parts.
Besides these contracts for CGS sister
companies, Buzuluk will also be working on
several major contracts for other clients, including JK Tyre India (a combined calender line
with a 4-roll calender), Harburg Freudenberger
(parts for kneaders, calenders, cylinders and
the installation of mixing units for Continental
in Timisoara, Romania), FATE Argentina (twincylinders) and Konštrukta (calenders). A key
aspect of Buzuluk’s business is its production
of piston rings. In addition to established clients such as Kolbenschmidt, the VW Group,
Wabco and ZMZ, the company is also involved
in a major new project to supply castings for
Fiat transmissions. Pavel Charvát, director
New Stand Concept at SIMA
At this year’s SIMA, thousands of visitors
stopped by the new Mitas and Continental
Agricultural tyres stand reflecting CGS’s new
dual branding marketing concept. With its sleek style, high-tech feel and modern look, the
stand showcased the Mitas and Continental
brands as equal partners in the CGS Tyres
portfolio. A Landini “New Bufalo” tractor occupied the focal point of the stand. Fitted with
Mitas 65 series tyres, the tractor won the
2010 classic Italian tractor pulling championship, proving Mitas tyres to be durable and
reliable. [SE]
CGS NEWS | Vol. 9 | No. 1 / 2011 | Page3
Landini Tractor Pulling Champion at SIMA, 2011.
Photo by Emil Houška.
CGS Tyres
expands in
France
Copadex and CGS Tyres have agreed that
as of 15 January 2011, Copadex will cede
exclusivity in distributing CGS-produced
Continental agricultural tyres in France. CGS
Tyres now sells all its brands in France, namely
Mitas, Cultor and Continental (produced under licence). This consolidation was preceded by an announcement made in September about CGS Tyres acquiring distribution
rights for Mitas tyres from L’Européenne de
pneumatiques. Copadex will continue to sell
Continental tyres.
“This change opens sales opportunities for
Copadex and CGS Tyres”, said Andrew Mabin,
marketing and sales director.“ In 2004, CGS
bought the Continental agricultural tyre division, and with it CGS inherited a sales network
that is now being optimised.” In the French
agricultural tyre replacement market, half
of CGS Tyres sales are currently in the Mitas
brand and half in Continental-brand tyres. “Copadex will remain the key dealer of CGS Tyres
in France,” Mabin added.
“This agreement will allow Copadex to sell
CGS Tyres’ industrial tyre range,” said Bruno
Clairay, managing director of Copadex.“ This is
a new step in our companies’ partnership,” added Xavier Menigoz, general manager of CGS
Pneus France. Both company representatives
displayed a keen interest in accelerating promotion of the Mitas and Continental agricultural tyre brands in France.
CGS Tyres is a major European producer
of off-road tyres. The company is looking to
expand its North American business as it is
building an agricultural tyre production plant
in Iowa. The plant will become operational in
2012. [SE]
events | products
IGTT – development strategy for 2011
IGTT is currently one of the the world leaders in
tyre testing, using state-of-the-art equipment
and the latest testing methods and procedures. Now the time has come for IGTT – also
one of the leading European manufacturers
of rubber industry moulds and containers – to
strengthen its position even further. This is an
ideal moment because it coincides with a period of intense development within the CGS
Tyres divizion – which has recently acquired the
Otrokovice plant near Zlín and broadened its
international portfolio by taking over a production facility in Serbia and building a new factory in
the United States. These developments enable
IGTT not only to increase its production volumes
for Mitas, but also to grow its market share in
mould manufacture for other global tyremakers.
The current range of moulds produced at
IGTT are used for a variety of tyres – for motorcycles, agricultural machines and cars, including highly complex winter tyre treads. IGTT
uses moulds split into two halves as well as
segment moulds, with cast or cut treads, made
of aluminium alloys or steel. The company also
makes holders for segment moulds. IGTT is
one of the few manufacturers that possess
Mitas Tires North America
Vladimír Dušánek
US project director
Effective Jan. 1, 2011,
CGS Tires US, Inc., the
U.S. subsidiary of Czechbased CGS Tyres, has
changed its corporation name to Mitas Tires
North America, Inc. In
addition, Mitas Tires plans to relocate its principal U.S. office from North Carolina to Charles City, IA. In Iowa, the company is building a
new tyre factory. The plant will start producing
agricultural radial tyres in 2012.
“Mitas is rolling into Iowa,” said Vladimir
Dušánek, U.S. project director of Mitas. “Mitas
has bought the Winnebago facility in Charles
City and finished the basic design of the new
plant.” The Charles City factory will serve Mitas to expand sales in the North American
market.
“We are switching the subsidiary’s name
to Mitas in order to promote our flagship
tyre brand,” said Andrew Mabin, sales and
marketing director of Mitas. [SE]
the know-how to make membrane moulds
with various surface types – smooth, grooved,
chromed, polished and with etched patterns.
The company applies two very different
types of production. On the one hand, IGTT
uses state-of-the-art modern equipment that
requires only minimal human supervision when
making the basic mould. On the other hand,
the finishing process involves intricate craftsmanship comparable with the finest jewellers
or goldsmiths, as highly skilled technicians remove tiny blemishes by hand.
But IGTT is not content to rest on its laurels
– the company wants to be the very best in its
field. Working in conjunction with designers
from MITAS, IGTT experts have developed a
unique way of constructing giant tyres. This
ground-breaking solution enables the company
to reduce the costs of mould production, helping us to fight off competition from cheap Asian manufacturers, and also gives a high degree
of flexibility so that a single mould can be used
to make different types of tyre. This solution is
truly unique: when IGTT submitted a project
application for EU structural funding, we received a grant of CZK 10 million. These funds will
enable the company to invest in modernising
its equipment and acquiring cutting-edge new
technologies – which is the only way to succeed.
Another core vision at IGTT is the modernisation of the foundry, which makes segments
and full circular castings for car and motorcycle tyres. In 2012, the company plans to
acquire equipment enabling us to carry out
gravitational casting with vacuum or pressure
technology. Marek Brázda, director
Weary of wear and tear?
At February’s opening of the second Agraria annual fair held in Valladolid, Spain, CGS
Neumáticos Ibérica presented Mitas Agriterra
02, a new model of flotation tyres. The exhibited size 600/55 R26.5 was available for sale
just a few weeks later. The size 710/50R26.5
will be launched for sale in Spain and worldwide later this year. Tyres of this size can
be fitted on the largest agricultural trailers
capable of carrying up to 12 tonnes per axle.
According to the Spanish Ministry of Agriculture, about 1,500 such trailers are put into
operation each year.
“Our flotation tyre design is based on a
proven concept,” explained Gabriel Markovič
of CGS Neumáticos. “This new Agriterra tyre
reflects a trend of Spanish farmers using increasingly large agricultural trailers to take
their produce from the field to processing. The
distance these trailers drive on paved roads is
also increasing.” When compared with competing premium brands, Agriterra 02 has a 15
percent longer operating life, which CGS has
tested under laboratory conditions.
Mitas began developing Agriterra 02 flotation tyres in 2009. The new Mitas Agriterra
02 has a reinforced shoulder area when compared with older Agriterra versions. “This again
increases durability by 7 percent,” Markovič
added. The tyre has a unique, easily identifiable
tread pattern with a contact area 9 percent larger than other premium tyres. “A larger contact
area reduces wear and tear. According to our
own tests, Agriterra tyres will last on average
six months longer in operation than other competing tyres,” Markovič added.
[SE]
CGS NEWS is published four times a year. This issue, volume 9, number 01/2011, was published by ČGS a. s. (Švehlova 1900, Prague 10, Czech Republic, identification No. 27410072) 30 March 2011 in Prague
under Czech Culture Ministry registration No. MK ČR E 19804. Editorial board: Vlastimil Founě [vf], Emil Houška [eh], Ralph Kellenberger [ral], Martin Maňas [ma], Jiří Šebek [se], Jiří Šimánek [si], Karel Špaňhel [ks]
and Nenad Tutunović [nt].
CGS NEWS | Vol. 9 | No. 1 / 2011 | Page 4