ZC Rubber put expansion on hold

The proposed expansion at Zhongce Rubber Group Co. Ltd.'s (ZC Rubber) plant in Thailand has been put on hold, according to Richard Li, global marketing director for ZC Rubber's International Business Group, due to market uncertainly. However, Mr. Li told Tire Business that ZC Rubber has plenty of available capacity, particularly for the commercial market.

Q How would you describe business thus far in 2020?

A We expect that the business will decline greatly in 2020 as the COVID-19 pandemic will probably last until year-end 2020. Therefore, the economy was hit greatly and the tire business also suffers. Fortunately, we forecast that the commercial tire business will be better compared to consumer tires as the daily business is still running when people are working at home.Q What are some of the key changes the company has made in order to keep employees and customers safe during the COVID-19 pandemic?A Using facemasks is a very useful tool to keep people away from the virus and prevent the virus from spreading, especially for those virus victims who did not realize he/she was infected. Therefore, all employees of ZC Rubber must keep social distance and have a facemask anywhere and any time when they were back to work in early February. Until today no employee of ZC Rubber was infected.

Furthermore, we supply thousands of facemasks to our distributors, too, to handle the virus issue. If they need more, we will supply more.

Q Do you expect any supply difficulties in the second half of the year? Why or why not?

A Fortunately, our supply chain is running very effectively. Even the raw materials from Europe arrived just slightly behind the original schedule. So we do not expect any supply difficulties in the second half.

Q What are some of the pleasant surprises you are seeing in the industry?

A The Chinese economy is recovering faster than expected. Now we hope that the whole world will recover soon. Today, the business in Europe and Southeast Asia is coming back but U.S. and Latin America are still slow.

Q The USW has petitioned for antidumping and countervailing duties on passenger and light truck tires made in Thailand, South Korea, Taiwan and Vietnam. What is your company's reaction?

A The USW petition is more like a political action, just to attract the eyes of U.S. workers. We will supply all evidence and documents showing that we are running our business in a market economy country, purchasing raw material at market price, paying employees market salaries, selling our products to the U.S. at a much higher price than other markets, and making great profits. Hopefully we can achieve a good result in this petition.

Q How might additional duties impact the industry?

A Rather hard to say. Actually, we do not think we are dumping even one tire in U.S. as our price for U.S. market is 3% to 8% (varies based on different product lines) higher than our price for Southeast Asia market. Therefore, we do not believe any dumping is available. However, we will follow all decided regulations or obligations set up by relative U.S. government.

Q The company announced plans to expand its plant in Thailand. Is that moving forward?

A Our expansion of the Thailand plant is for quickly growing the Southeast Asia market, not for the U.S. However, at the moment, we have to postpone the expansion as we do not have a certainty for the future. If the import duty for the U.S. is quite high, we are forced to shift the capacity to the local market. So everything depends on the coming judgment of injury.

Q Where do you see the markets heading during the second half of 2020? What kind of trends are you seeing?

A The market will remain slow in the whole 2020. As mentioned before, the commercial tire sector is recovering faster compared to consumer sector. However, the trend will not last a long time after people return to work. ZC Rubber maintains a production capacity of over 20 million truck tires, and we hope that we may have some more benefits than our competitors.However, we definitely have to struggle as the competition will be tougher and tougher in the coming months. Much capacity was idled in the past weeks, and inventories are still in warehouses of manufacturers and distributors. It needs some time to clear the inventories first, then we can come back to normal track.

Q Do you expect to roll out any additional products in 2020? What will they be and what sector will they serve?

A New products will be important to expand market. We are going to introduce new truck tires upgraded from our available lines in the second half of 2020. We offer better performance but similar cost for the upgrading so that we may provide more value to our customers.

Q Do you foresee any more price hikes in the second half of the year?

A The low raw materials cost will maintain tire prices at a low level, but if more imported duty is imposed on Korea, Taiwan, Thailand and Vietnam tires, the duty will be paid by the end users. In another words, the price of passenger car and light truck tires will be decided by the (U.S. Department of Commerce).

Q What are some of the challenges of the industry? What keeps you up at night?A We always treat the demand of the end user as the top priority. Premium brands create new market concept or generate new ideas to consumers in order to increase the price and have more profits. Our philosophy is to supply the customer with safety and value.

We will provide what customers want, long mileage, excellent traction, low noise and so on. We supply popular sizes with regular speed rating based on OE list, but not persuade consumers to pay more to change the size, upgrade the speed rating or even buy new, larger wheels. We obtain our profits by mass production to amortize the fixed cost and lean production to avoid any possible waste.

We cherish the distributors' support and cherish the consumers' loyalty. We believe if we can serve our distributors and customers well, we may have the reward and continue the business. Challenge and competition are there; we just try to find a way out.