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Medium, large OTR demand fuel BKT growth

Minoo Mehta, president of BKT USA Inc., the U.S. subsidiary of India’s Balkrishna Industries Ltd. (BKT), discussed his company’s successes as well as the challenges ahead in an interview with Tire Business.

Q: How would you describe business thus far in 2018?

A: For BKT, it has been the best start this year compared to the last three years. Demand for BKT tires is primarily fueled by excellent quality, which creates repeated fitments once tires get on wheels. All segments of our tire business are showing growth for us, with large OTR tires leading the way.

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

A: The biggest surprise seen this year is the result of antidumping and countervailing duty rulings on imports of Chinese truck tires in Chinese manufacturers’ favor.

For OTR tires, where the ruling was not in their favor, Chinese manufacturers have been fast to react in moving production to other neighboring countries for the U.S.A., thereby increasing the imports from Thailand and Vietnam considerably.

Q: Where do you see the industry markets heading during the last half of 2018?

A: The tire industry is growing at a reasonable pace, and we feel it will continue during the last half of 2018. However, the industry will be implementing price increases based on the current price trends of raw materials.

Q: What kind of trends are you seeing in the marketplace? How is your company reacting to them?

A: BKT truly cares about the end customers of BKT tires, and we listen to their needs and provide solutions. We are making headway with growth.

We have also been focusing on brand awareness of the BKT brand to end consumers, and we are seeing growth. We have also been spending a high percentage of our top line in promoting our brand and in research and development.

BKT operates in a niche market of OTR tires, and hence consolidations, mergers and joint marketing agreements by manufacturers do not really affect us in our tire markets.

Q: What sectors look to be strong? Are they sustainable?

Mehta

A: For BKT, medium and large OTR appear to be strong. Construction, industrial, material handling tire segments are showing a higher growth than the farm tire segment this year, which had a late start and is flat. BKT enjoys a very healthy market share in farm tires.

Q: What sectors are struggling? Do you expect them to rebound?

A: There appears to be some apprehension in tire manufacturers because we see them trying to maintain the market share by reductions in radial farm prices. This is hurting the distributors/dealers and general tire industry.

With the increase in raw material prices, it is a double whammy. We expect this to end soon because it cannot be sustained. Except for farm tires, most other tire segments are holding their ground.

Q: What kind of benefits do you hope to attain by collaborating with Kultevat on an R&D pact? How does that fit with the company’s objectives?

A: Looking ahead in the coming years, we feel that natural rubber stocks will not be sufficient to meet the existing and future demand. Alternate sources of rubber will become a necessity.

Between 2000-16, global demand for natural rubber nearly doubled to 12.6 million metric tons. Compared to synthetic rubbers, natural rubber has several advantages.

It’s higher molecular weight and stereo regular microstructure mean that it has higher tensile strength, excellent cut and tear resistance, and is slow to heat up during repeated stress deformation — a critical property needed for tires, particularly for large or industrial vehicles.

Kultevat is years ahead in research of natural rubber from Russian dandelions. The rubber derived is cleaner, with better properties than natural rubber from Hevea brasiliensis rubber trees. Impurities content is also lower.

The byproduct, inulin, has great commercial applications, making the whole project viable. The rubber production cycle is less than a year, compared to eight years-plus for natural rubber from trees. We are confident that it will help in improving our quality and that fits our company’s objective to stay ahead of the competition.

We are also putting up a sophisticated carbon black (CB) plant in Bhuj (India), with a capacity of 120,000 MT p.y., which will meet our inhouse demand for CB.

Q: How have customers reacted to the ATV tire rolled out at SEMA last year? Any plans to add to the line?

A: We are continuing to develop more sizes and patterns in the ATV segment. The new tire has been accepted well in the market. We introduced the AT 171 pattern with 11 SKUs, and they have had tremendous success in the market.

Q: Has the threat of tariffs affected your business? If so, how?

A: As far as BKT is concerned, there is no threat of tariffs. It is a fact. Government voted in favor of imposing countervailing duties of 5.36 percent on BKT tires, which has impacted our bottom line. We have no choice but to move on and stand by our loyal distribution base and continue supporting them and the end customers they service.

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

A: Most likely. Oil prices, carbon black, synthetic rubber and chemicals have gone up in price, which ultimately impacts the price of the tires. We expect a price increase between 4 to 6 percent happening.

Q: What are some of the challenges of the industry going forward?

A: Political climate. Government policies are one of the main factors that affect the tire industry. It also is the reason for turmoil in the tire industry.

Trade wars that result affect the movement of tires directly and indirectly. Export and import policy also affect tire demand. An example of policy that impacts export of agriculture produce directly affects the spending money in the hands of farmers, which further impacts the OE, tire demand and farm machinery markets.

Weather conditions is another challenge we face. Late start of spring/summer directly affected the farm industry and farm tires.

Q: How have the tax cuts affected how you do business? Are customers more willing to buy because of the tax cut?

A: Tax cuts given recently are insignificant to impact the buying power in the OTR tire industry.

Q: Do you expect any major investments in the next six months?

A: Yes. BKT will continue to expand the production capacity to meet the growth in demand from its existing distribution base in 160 countries of the world.

Major investment is slated for a carbon black plant scheduled to be commissioned in Q1 2019.

Q: Anything else to add as we near the halfway point of 2018?

A: Overall, for BKT the worldwide outlook is very bright, and the entire team is excited to ride that wave of success in the coming years.

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