Do light tyres require more insoluble sulfur?
Hi Sunil
I would twist the question slightly. Do higher performance tyres require more insoluble sulphur? The answer to this question will be yes.
For everyone you can read in great detail what goes into making a high performance tyre at this Tyre Compounding for Improved Performance.pdf (656.4 KB)
Tyres are either radial or non radial (basically bias type etc). I believe the non radial ones are cheap but they have many disadvantages. Refer to wikipedia for the advantages of radial tyre and also Michelin website. In the 80s all tyres sold in the US was radial in nature.
What would constitute a high performance tyre? The pdf attached describes very succinctly the characteristics of one. Essentially the traction (what energy from the engine is converted into actual movement as described in my last post), rolling friction, noise, durability are the factors.
Quoting verbatim from the document on insoluble sulphur âSulphur, together with the activators and accelerators, reacts with the covalent bonds along the polymer backbones to form sulphur links. The number of sulphur atoms across each link and their density along the chains determine the final properties of the compound and in some critical components, the resistance to damage or ageing. Novel curing systems are being introduced (106, 163) which are claimed to control the crosslink length and thereby improve reversion resistance.â
The Annual Report of OCCL also mentions this âMore Insoluble Sulphur is consumed in High performance tyres and new tyre technologies.â
No matter what vehicles run on the road they will still need tyres unless there is some technological breakthrough or commute/travel becomes independent of road travel. But do we see such a future?
Regards
DV
6 Likes
ChinaSunsine is also ramping up insoluble sulfur production. Companies like NOCIL and China Sunsine who already provide most of chemicals should be able to take this area too .
What is advt OCCL has vs others is it R&D .
Hi @amitverma21 - can you please share any article or data around the expected ramp-up by ChinaSunsine? As per OCCLâs annual report and other industry data - China manufacturers havenât been successful in ramping up the production. The market continues to have just 3-4 playersâŚperhaps its due to combination of technology entry barrier + very high capital requirement to put up capacity + long approval process + already matured and slow growing market.
Regards,
Ayush
2 Likes
I have done a channel check ( alongwith a friend) with a few dealers in tyre industry and based on their inputs, the chinese players have occasional quality issues that makes the industry wary of sourcing from them. Quality issues in even one batch of insoluble sulphur affects a very large quantity of manufactured tires, so companies are typically not willing to take a chance. Take the info as you like, the dealers werenât manufacturers themselves but know a fair bit about the industry.
8 Likes
China Sunshineâs annual report throws good light on their insoluble sulphur capacities and sales volume. Currently, they have a capacity of 20,000 tpa which is being increased to 30,000 tpa. Some excerpts from their Annual Report for Financial Year ended Dec 31, 2016:
Detailed annual reports can be accessed from: Home - CSCH - China Sunsine Chemical Holdings
The OCCL annual report also mentions about the Chinese market size:
Discl.: Invested in OCCL
7 Likes
Hi Ayush,
I was researching this topic and particularly Chinasunsine . Unfortunately
stock moved very fast to double in couple of months. Kinldy go through
Annual reports of Chinasunsine.
http://www.chinasunsine.com/index.php?option=com_content&task=view&id=19&Itemid=35
Barrier to entry in this case be technology but in chemical compounds i
dont think OCCL is innovator or has any patents on compunds or process.
1 Like
What does it take to add new capacity in insoluble sulphur? In terms of project cost and timelines, companies including OCCL seem to be coming up with expansions in 15-18 months with minimal balancesheet strain.
Given this, it does seem that there are entry barriers as highlighted by OCCL in the form of quality improvements exhibited by the top 3 players (including OCCL) and quality gaps maintained over the rest of the pack.
The factor that buttresses demand for OCCLâs products is that indian demand is slated to grow in double digits over the next couple of years so any ramp up in Chinese supply should have limited impact.
Hello
I was trying to understand what it takes to enter this market and my observations are as follows. Please correct me if you think my understanding is incorrect.
- Due to radial tyre uptake and effect/demand of high performance tyres the demand of insoluble suplhur per âunitâ tyre has increased. This is captured in the May 2017 presentation.
- A new entrant has to hurdle over three essential roadblocks
a) Infrastructure investments: If you look at the asset block in the latest balance sheet and schedule 10 we realize that over 50% of the asset value comes from own land, factory, plant and machinery. This would require setup capex.
b) Product lines: OCCL offers different varieties of insoluble sulphur ie regular, high stability and specialized grades. This learning curve would have to be traversed by a new entrant. Though after searching in Google patents I could not find anything related to OCCL. At the same time OCCL is working on newer products and investing in R&D to stay ahead.
c) Any new customer ie tyre company requires minimum 24 months to validate and approve the quality of insoluble sulphur from the new supplier. So this gives a lead time to OCCL and other players. Also we need to ask why would the tyre manufacturers switch to a different supplier? Lower pricing or quality issues? Does this appear to be a sort of a moat?
From an industry perspective it seems to be in a favourable zone.
Rgds
DV
Disclosure: tracking amount
4 Likes
i dont think any perosn or company will not allow raw material if it is available cheaper the 24 month time is just a myth i feel ithey can do lab testing of the raw material and go ahead if the properties are equivalent only if they can diliver better product and reasonable price they wont be replaced CHINA IS A BIG THREAT TO COMPANY I FELL IF THEY ARE NOT ABLE TO BE COMPETITIVE
Q1 results
http://www.occlindia.com/_financials/_results/QFR/FY18/OCCL-QFR_FY18_Q1.pdf
Total income up 3.1% to 82.4 cr.
Electric cars (and any car in general) have a cap on energy consumption/ km.
One parameter which affects this energy consumption is rolling resistance of tyre (25% contritution)
Radial tyres have lower rolling resistance. And hence going forward if EV picks up then radial tyres requirement will go up.
Radial tyres require more insoluble sulphur.
8 Likes
Hi OCCL investors
There is a sudden spurt in the market price. I did not get any news flow so could not correlate the events.
Please could someone share what has just happened. Thanks.
Regards
Deepak
1 Like
Hi
Thanks Saji.
A newbie doubt:
I was checking the bulk/block deal in the morning and now again but couldnât see this transaction. Is it supposed to reflect in this category as it was a market purchase as per the filing.
The purchases happened on the 15th (Friday) and we came to know on Monday post market hours.
Just curious.
Thanks.
Regards
Deepak
Q2 Results declared
http://www.bseindia.com/corporates/anndet_new.aspx?newsid=788d5cd5-ef7e-40c3-b113-82e2db4d3f75
Highlights from the press release
1 Like
Hi
The results for the quarter seem decent.
3a389a77-8b54-4855-9b17-d688f93a3afa.pdf (2.3 MB)
Regards
1 Like
Anti dumping duty on chinese tyres might help further
From the latest Annual Report of Eastman Chemicals (one of three internationally accepted suppliers of Insoluble Sulphur)âŚ
In 2017, the Company:
⢠advanced growth and innovation of CrystexŽ insoluble sulfur rubber additives through completion of an expansion of the manufacturing facility in
Kuantan, Malaysia that management expects will produce material qualified for commercial sales in 2018. This expansion is expected to allow the Company to capitalize on recent enhancements of technology for the manufacture of CrystexÂŽ insoluble sulfur by improving the Companyâs cost
position and facilitating the introduction of new products into the tire markets;
2 Likes
Prices of insoluble sulphur remain firm given the demand. Sunshine recently reported good numbers. The average selling prices are higher and firm due to increasing environmental regulations in China.
3 Likes