Founder: Turnaround Talk
As the Global Supply Chain Crisis intensifies, and the South African manufacturing sector facing its own challenges, many South African industries may find themselves on an unavoidable collision course with possible financial distress.
One such industry is the tyre industry. With the manufacturing challenges facing the automotive industry well documented, South African motorists may find that they will need to fork out considerably more for tyres.
Key focus areas
The News24 article points out that SA’s tyre manufacturers say this year, they are focused on fighting illicit tyres, decarbonisation, and tackling waste tyres.
The article points out that their focus on sustainability comes as they battle with double-digit cost inflation and a possible key decision in March on alleged dumping from China.
The South African Tyre Manufacturers Conference (SATMC), which represents the four SA manufacturers of the critical vehicle component – Bridgestone Southern Africa, Continental SA, Goodyear SA and Sumitomo Rubber SA – held a briefing on 15 February in which they outlined their priorities.
An industry in limbo
The article points out that key for the industry will be a possible next decision on dumping from China, with a six-month provisional excise duty of 38.33% set to expire on 8 March. This was introduced by the International Trade Administration Commission (ITAC) in September 2022 in a bid to discourage dumping, and covered car, passenger and bus tyres from China. The industry is now awaiting a possible extension, or final determination.
SATMC chair Lubin Ozoux, who is also CEO of Sumitomo Rubber SA, said on Wednesday the lobby group was confident in the evidence it had submitted to the body, which is conducting its own independent investigation, but would respect any outcome.
“If we look since 2011 we have had two factories closing down already, one in Durban, one in Port Elizabeth, so it is putting a lot of strain on the industry,” he said. “We are not looking for advantage,” he added.
Photo By: Reuters
The article adds that the SATMC collectively employ about 6 000 people, with 19 000 employed indirectly, estimating that it contributed R15.9 billion to SA’s economy between 2019 and 2021. Over 70% of tyres sold by the manufacturers are made in South Africa.
Ozoux said on 15 Februray that there had already seemed to be positives as a result of the anti-dumping duties, in terms of the import of good quality tyres from countries they had not seen before.
“I think what we have seen is sourcing of tyres from different countries now, so we see a lot more products from the likes of Thailand, Vietnam and other countries that are coming into the country and these are, I think, much better regulated,” he said.
“Whenever you have a change like this you have a period of adjustment when people don’t really know where things are going to settle. I think we are going through that at the moment, also people waiting to see what happens in March. There is some uncertainty at the moment in the market,” he added.
Cost push
The article points out that Ozoux said the industry was battling with the effects of load shedding, but also higher input costs, insurance costs – which have become increasingly tough to get for factories in SA – as well as raw material costs, notably a surge in coal prices in 2022. Along with the latest electricity tariff hike of 18%, “double-digit is potentially not unrealistic going forward,” he said, though it did depend on these factors.
The Rand remained fairly unstable, he said, although freight costs did appear to be stabilising. The industry also needed to remain competitive, he said, not just locally, but also with importers that are a large part of the market.
“It’s not an opportunity to profiteer,” he said.
Photo By: Canva
Waste tyres
The article points out that the SATMC also said a focus in 2023 will be on working closely with tyre dealers to encourage correct storage of waste tyres, and exploring the commercial prospects for waste tyres, with the aim of supporting enterprise development and job creation.
Consultation is under way on the draft Section 29 Integrated Industry Waste Management Plan for Tyres (IndWTMP), developed by the Council for Scientific and Industrial Research (CSIR) on the notice of Minister of Forestry, Fisheries and the Environment, Barbara Creecy, the council said.
Thew article adds that, in terms of Section 29(1) of the National Environmental Management: Waste Act 59 of 2008, the plan provides requirements for the implementation of effective and efficient waste tyre management in South Africa and sets out guidelines and requirements for all tyre industry role-players. Failure to manage waste tyres as prescribed in the IndWTMP is a criminal offence.
SATMC managing executive, Nduduzo Chala, said the industry has long been advocating for a process that will cater for the processing of end-of-life tyres. The SATMC is also lobbying in relation to second-hand tyres or part-worn tyres, which remain unregulated in the country, posing a serious safety risk for road commuters.
“As such, among our priority areas is to ensure that there is a part-worn standard developed through the South African Bureau of Standards (SABS) and to challenge the importation of second-hand passenger casings into the country, as these end up on our roads, becoming not only an environmental hurdle, but more importantly, a safety risk,” said Chala.
Chala said the SATMC is not opposed to second-hand tyres, but it there was a lack of regulation and waste collection was not working properly. The SATMC estimates that north of one million second-hand tyres a year are sold in SA, further estimating about 60% of these are illegal. It cautioned these were assumptions. Records show 12 million live vehicles in SA as of 2021, implying at least 51 million tyres in use.
Power supply
Ozoux said on Thursday, the industry was doing its “level best'” to avoid complete shut-downs of its production as a result of load shedding, and was now actively working with municipalities.
“Thankfully, we are making some progress with the municipalities, which appear willing to discuss and find solutions to minimise the impact,” he said.
The article points out that one of the possible solutions being discussed is reaching an agreement on some reductions of load for certain periods of time, which would provide the plants with more flexibility to manage production accordingly.
Engagements with government and other auto industry stakeholders will continue, he said.
The article adds that the SATMC also said on 16 February that one of its initiatives in 2023 will be for a clear roadmap to reduce carbon emissions, while also developing a tyre industry position on the Carbon Tax.
“To this end, we are working closely with our members to identify and implement best practices that will help us achieve our carbon reduction targets,” said Ozoux.
