23 September 2010 15:50 [Source: ICIS news]
PRAGUE (ICIS)--Global tyre demand is expected to grow by 5% per year until 2015 amid increased competition among rubber producers, Raiffeisen Centrobank said on Thursday in a report on Polish synthetic rubber producer Synthos.
Analysing the steady growth that synthetic rubber producers could look forward to, Raiffeisen said limited sales declines during the global economic downturn had “confirmed the tyre market is relatively less cyclical compared to other chemical industry products”.
“In 2009, the worst year for the industry, the global market of tyres for passenger cars and light trucks declined by only 3% in the replacement tyres segment, while original equipment (OE) tyres dropped by 12%,” the bank noted.
“Overall, we expect an average demand growth from the global tyre industry of 5% year on year in the next five years. We would not expect much stronger growth given that the majority of sales (almost 75%) constitute non-cyclical replacement tyres, not OE,” it added.
Raiffeisen’s forecast for the whole of 2010 showed that world demand for butadiene rubbers would stem mainly from the Asia-Pacific region (52%), followed by Europe, the Middle East and Africa (25%), and the Americas (23%).
In its focus on Synthos, Europe’s second-largest synthetic rubber producer, the bank said it had downgraded its recommendation on the company's stock to “hold” from “buy” because the share price already took into account the Synthos' record second-quarter results and expectations of strong results in the third quarter.
Raiffeisen said Synthos could also expect that the “long-term chemical product cycle will lead to a decline of margins”.
“Extraordinary profits in the chemical industry are usually captured for no longer than two to three years due to the following supply adjustment…it takes up to three years to complete capacity expansion projects…[and there have been] numerous expansion declarations of global industry players”.
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