At present, steel cord industry faces difficult development situation where the capacity is severely excessive, the profit falls sharply and the steel cord enterprises struggle. This was the general reflection of steel cord industry during the “Challenge, Breakout - Promote Upgrading of Chinese Tire Industry Chain with Synergistic Effect” Seminar hosted by BEKAERT Company on April 26. “The industry shall prepare for greeting the challenges, realize breakout relying on technical innovation and cooperate with tire enterprises to promote the upgrading of Chinese tire industry chain.” Dr. Liao Jun, senior vice president of BEKAERT Group, said.
Investment shall be “washed” and cooled
Over 30 years of rapid development of tire industry drives the increase of steel cord enterprises and over ten years of rapid growth of capacity and the capacity gradually turns from over-demand to over-supply. China’s steel cord output in 2011 was 1.51 million tons, and the demand estimated according to the tire output of the same year was 1.357 million tons, with a difference of 150,000 tons; the output of 2014 was 1.927 million tons, with a difference of 230,000 tons with the estimated demand of 1.697 million tons. In 2015, along with the slowdown of global economy and increase of downward pressure of China’s economy, the demand for radial tires was low, especially, the output of commercial vehicles closely related to all-steel tire, the main application field of steel cord, fell by 2.7%, which resulted in that the excessive capacity of steel cord was more obvious, the industry competition continuously intensified, the enterprises competed to reduce the price for sales, maintained market share and seized orders, and the economic indicators and benefits of key enterprises got worse, thus affecting the accumulation and input of R&D funds.
By the end of 2015, the steel cord capacity of Jiangsu Xingda Steel Cord Co., Ltd. had reached 610,000 tons, but the sales volume had had a year-on- year decrease of 2.0% to 501,100 tons, the gross profit rate had narrowed by 4.9% and the realized operation revenue had had a year-on-year fall of 15.3%. The sales volume of steel cord of Shougang Concord Century Holding Limited was 115,600 tons, with a decrease of 2.5%. Although both the price of the raw material steel wire rod and the selling cost of steel cord slightly decreased, the decline of average selling price reached 14.1%, the bull could not compensate for the turnover decrease, and the gross profit sharply fell by 92.6%.
While reducing the purchase cost at source, Hubei Fuxing Science and Technology Co., Ltd. raised the selling price in the end, fully implemented the strategy of “adjusting volume and maintaining price”, firmly grasped capital return and optimized inventory management. Although it adjusted its thought correctly, the operation revenue of steel cord still had a year-on- year decrease of 33.19% to 577 Million Yuan, and the gross profit rate also declined by 14.23%. The operation revenue of steel cord of Henan Hengxing Science & Technology Co., Ltd. was 474 Million Yuan, with a year- on-year decrease of 16.09%, and the gross profit rate decreased by 5.62% compared with that of last year.
Facing the situation where the photovoltaic solar sawing wire products were in short supply while steel cord had low profit, one enterprise straightforward utilized the excessive equipment and capacity of steel cord for producing sawing wire.
It never rains but it pours. “Since this year, especially in March and April, the price of the raw material steel wire rod rose up substantially. The price of 72A Φ5.5mm variety of Jiangsu Shagang Group was adjusted from 2,870 Yuan/ton in early March to 3,670 Yuan/ton in late April, with a growth of 27.8%. In early May, Shagang increased the price of each ton to 3,970 Yuan/ton again.” Yu Tao, secretary general of CRIA Framework Materials Specialized Committee, said, “Recently tire enterprises have anticipation for rise in price of steel cord, thus they increase the purchase volume in case of low price, the operating rate of key steel cord enterprises increases and even becomes full. Although the steel cord industry also carries out price adjustment with the growth of 500~600 Yuan/ton, it is far from offsetting the cost pressure brought about by rise in price of steel wire rod, thus it is predicted that the steel cord industry will have another price adjustment action in June.”
The industry experts thought that the tire enterprises had no lack of steel cord suppliers, it was difficult to have effect quickly by reducing the capacity with external force. It was suggested that the investment in steel cord should be “washed” and cooled to avoid grimmer situation of over-supply and severe homogenization.
Innovation Breaking Out for “Quenching” Rebirth
Price competition has always been the chronic disease of excess industry. Vicious price competition not only goes against healthy development of the industry and causes bad money driving out good money, but also forces some excellent leading enterprises to exit market. For steel cord industry, the sales policy of lower than the cost can not last. Paying attention to the downstream technical development direction, market dynamics, etc. and energetically carrying out technical innovation to transfer the technical results into the benefits of the clients and self profits is the best policy, and then the whole industry can realize sustainable, stable and healthy development.
“China’s tire industry, including steel cord industry, shall get rid of the development mode of competing with cost and price. Only by responding to the calls of green production and energy conservation and environmental protection can tire industry and steel cord industry realize breakout by actively relying on R&D and innovation.” one insider said.
Feng Shide, manager in Global Market and Research of BEKAERT Rubber Reinforcing Department, introduced the change in demand of the supporting OEMs and downstream clients for tires. He said, OEMs put forward higher requirements for rolling resistance of tire, in which Audi hoped that the rolling resistance would be reduced by 15%~20% for tire of passenger cars by 2020; and Daimler hoped that the rolling resistance would be reduced by 30% for tire of commercial vehicles. It was predicted that the proportion of electric vehicles and hybrid electric vehicles in passenger car market would reach 10%, and high cruising ability after charging highlighted the key function of reducing rolling resistance of tire. To reduce the composite cost of tire, big motorcades in America had conscientiously selected low-rolling resistance tires, whose ratio had reached 80%~90%; in addition, the use ratio of wide base tires was being gradually increased, which had significant function in reducing fuel consumption.
Downturn of global economy, already implementation or imminent implementation of tire label regulation as well as change in demand of OEMs and downstream clients for tires all put forward higher requirements for R&D and production of safe, green, energy-saving and environment-friendly tires, and low-rolling resistance tires and high-performance tires have become the R&D focus.
“International leading tire enterprises have input a large amount of resources in R&D and application of ST/UT (super strength and ultra strength) type steel cord in tire since the 1990s.” Feng Shide introduced, the application of ST/UT experienced the evolution process from large-size tires to small-size tires and from truck and bus tires to passenger car tires, and the application enterprises also developed from 17 in 2009 to 51 in 2015. “Practice of international leading enterprises in ST/UT leads the quality of tire products to a new level.”
“Global tire enterprises started to use NT (normal strength) steel cord since the 1970s and gradually applied HT (high strength), ST (super strength) and UT (ultra strength) in tires, the strength of the steel cord products increases by one level every ten years. MT (mighty strength) under development at present is 500MPa higher than UT.” Luo Yiwen, director in Global Innovation of BEKAERT analyzed the use condition of steel cord in China, “China started to apply NT in the 1990s, HT was dominant after 2000, and in 2003, 80% were NT products and HT occupied 20%. Now NT/HT are still the mainstream, and ST/UT are increasingly applied. For example, in 2014, NT accounted for 20%, HT 70% and ST/UT 10%.”
“The tire demand drives the development of steel cord.” as Luo Yiwen introduced, ST/UT new steel cord developed by BEKAERT was suitable for tires with low rolling resistance, light weight, longer service life and higher performance and could reduce the manufacturing cost of tires. The biggest advantage of reducing the weight of cord fabric was that with higher strength of steel cord and smaller diameter of cord thread, the load capacity of unit area of the tire could be increased, it could guarantee that the cord fabric could be made thinner with same rubber adhesion and the usage of cord thread and compound could be reduced, thus lightening the tire mass, reducing the production cost and complying with the light-weight development requirement of tire. In addition, weight reduction was beneficial to bringing about lower heat building and rolling resistance as well as high durability while thinner thickness of cord fabric brought about higher stiffness, thus bringing about better controllability and abrasion to the passenger car tires. Three-phase alloy coating technology developed by BEKAERT eliminated the demand of adhesive for cobalt, thus the adhesion retention rate was increased in warm wet climate and the durability advantage became prominent to obviously improve the tire performance and environmental influence on tire. The application of this technology guided the development of more environment-friendly and safer passenger car tires and truck tires.
It is learned that in Guidance Outline of “13th Five-Year” Development Program of Rubber Industry, increase of strength of steel cord, three-phase alloy coating steel cord, etc. have been listed as key products of priority.
There have been some domestic steel cord enterprises in China insisting on the development path of “technical innovation driving product innovation” and participating in the development of UT new products. Henan Hengxing successfully developed 16CC ST in 2015, has finished the development of the samples of new products such as 2+7 ST, 4+3 ST, etc. and is further improving the process; the UT Steel Cord for Low-Rolling Resistance and Green Tire Project of Jiangsu Baosteel Precision Steel Wire Co., Ltd. has been listed as “China Torch Program Industrialization Demonstration Project”.
