As the war in Ukraine continues, so do the Russian Army’s tyre problems. We have previously reported on the observations of military analysts that the Russian military has been let down by the combination of low-quality and very old tyres. More recently – and bizarrely – we learnt that presumably end-of-life tyres were being used as defensive camouflage for Russian air force jets. Now, the problem is just lack of supply.
Nokian Tyres reports that it has received the sale price of 285 million euros from PJSC Tatneft for the sale of its operations in Russia. The total permissible transaction price defined by the Russian Governmental Commission was 23,050 million rubles. Now there are just “registration formalities” before the transaction completes and Nokian Tyres’ operations in Russia therefore end.
As the war in Ukraine drags on into its second year, ongoing vehicle usage as well as the kind of tyre failure episodes that have been reported for the last 12 months mean Russian military tyre supply is as stretched as ever. Indeed, some social media videos show Russian military equipment in active service with less than a complete set of tyres.
Roughly a year after Russia invaded Ukraine, tyre problems remain a significant hindrance for the Russian army. 12 months ago we reported on how tyre selection and product quality had resulted in military machinery literally getting stuck in the mud and Russian military tyres failing on certain occasions. Now, further evidence suggests that long-term tyre maintenance as well as tyre supply problems are causing additional bottlenecks.
Despite initially planning to sell its Davydovo, Russia tyre production plant to the factory’s local management, Michelin is now in talks with Moscow-based Power International Shiny LLC. Michelin reportedly hopes to reach an agreement with the new buyers “soon”.
In June 2022, Nokian Tyres was the first tyre manufacturer to use the terms “controlled exit” to describe its withdrawal from operations in Russia. Now, Continental has joined them, with Conti CEO Nikolai Setzer using very similar language as part of the German tyre and automotive supplier’s full-year 2022 financial results presentation.
Many tyre makers have faced difficult decisions in the weeks and months since Russian troops first marched across Ukraine’s border on 24 February. Companies such as Nokian Tyres, Bridgestone, Continental, Michelin, Yokohama and Pirelli have needed to decide whether to continue operating their Russian plants. Four of these manufacturers are turning their backs on Russia or considering doing so, but two apparently are not.
Following its decision in March to suspend all manufacturing activities in Russia, Bridgestone has officially initiated the process of finding a local buyer for its Russian assets. The process of finding a buyer and closing any subsequent deal is expected to take “several months”.
Nokian Tyres plc has agreed to sell its Russian operations to Tatneft PJSC for approximately 400 million euros. The precise final purchase price will be affected by factors including net cash, working capital adjustment and foreign exchange rates. Confirming the news, Tatneft issued a one-paragraph statement saying the deal includes the plant in the city of Vsevolozhsk, in the region of Leningrad and that “the closing of the transaction and the purchase of assets is subject to a number of conditions, including obtaining approvals in accordance with Russian law.”
Since March, cumulative passenger car and light truck tyre imports to the European Union and UK have, for the first time, recovered to run above pre-pandemic levels. This is despite the well-documented impact of sharply higher ocean freight costs in this period, and disruption to production in some source countries. A newly published report by Astutus Research, “European PCLT Tire Demand and Supply Forecasts to 2026”, shows that in the first seven months of 2022, European (the EU-27 plus UK)* imports from outside the region were 11% higher than the same period last year and 5% higher than the equivalent pre-Covid period in 2019.
In light of strongly rising energy prices in Europe, chemical firm and synthetic rubber manufacturer Synthos has announced that it can no longer produce Emulsion-SBR (ESBR) at full capacity. It will thus reduce ESBR output by approximately 30%, equivalent to around 100,000 MTPA, effective immediately.
After an April to June period punctuated by negative EBIT and a net loss, tyre maker and automotive components supplier Continental says it is “looking ahead to the second half of the year with optimism.” It is also maintaining its full-year outlook despite a current headwind that chief financial officer Katja Dürrfeld describes as being “rather like a hurricane.”
In a market hit by the systemic impacts of the conflict in Ukraine and the health crisis, the Michelin Group reports that its net income fell by 18.3 per cent despite a year-on-year increase in sales. The tyre maker nevertheless considers this a good result “in an extremely unsettled environment.”
UK car production in grew in May 2022 for the first time since June 2021. The Society of Motor Manufacturers and Traders (SMMT) report that a total of 62,284 units left factory gates during the month, a rise of 13.3 per cent. SMMT notes, however, that the increase must be viewed in context against May 2021, which was still suffering significantly from pandemic-related headwinds. Output remains 46.3 per cent below the pre-pandemic month in 2019, with ongoing supply chain issues, increasing economic uncertainty, rising business costs and disruption caused by the war in Ukraine.