Nynas eyes bigger presence in Asia
By Sharad Matade:
Growing tyre manufacturing facilities to meet local demand and tightening regulations for safe and eco-friendly tyres in Asia will drive the growth of Nynas in the region, said Simon Day, Vice President, Naphthenics at Nynas AB.
“Global markets are at different stages today. European and the US markets are focusing on improving rolling resistance and fuel efficiency, and have a fairly flat growth, whereas the Asian market is going through a phase, where new regulations are being introduced and the giant tyre companies are expanding their presence to meet an increased local demand. Considering the growing demand in the region, Nynas has expanded its presence in Asia, mainly in China, India and South East Asia, and will continue to do so going forward” said Day in an interview with Tyre Asia.
Today Asia is the largest market for Nynas’ global tyre oil business. The Asian region contributes 40% of the company’s total safe tyre oil business. The company has approximately 30 depots across the globe for timely and cost-effective delivery to its customers, and 10 are located in Asia.
Nynas has recently invested in expanding the capacities and capabilities of its refineries, technical support and R&D organisations. “We will continue to invest to support growth in our tyre business,” added Day.
Recently, the Swedish-company opened a new laboratory to strengthen its testing capabilities in the field of rubber and tyre manufacturing. The lab is equipped with an intermeshing 1.5-liter rubber mixer and an open mill, as well as instruments for measuring viscosity, curing behaviour, physical and dynamic properties, aging, abrasion and set.
“Our laboratory is staffed with people who have come from the tyre industry, with expertise in tyre manufacturing and rubber compounding. These capabilities enable us to have a good rapport with customers and help us to develop improved products for their beneft, building on our expertise with oils” added Day.
Along with lab testing, the company, in the last two years, has been conducting field testing to evaluate its naphthenic oils’ performance in tyres. Nynas claims naphthenic oils perform better, compared to other tyre oils, on rolling resistance and improved fuel economy without affecting traction.
Being a caterer to a niche segment, safe tyre oils, Nynas possesses certain advantages, which are more beneficial to its customers, according to Day. “Our competitors are large oil companies, which focus more on fuels and engine lubricants, and tyre oils are a marginal by-product for them, whereas the safe tyre oil, naphthenic oil, is one of our core products. So we are able to dedicate our research, investment, supply chain, technical resources and sales support to our customers, and to maintain consistency in both supply and product quality in our wide range of naphthenic oil products,” said Day.
Around 18% of the company’s global sales come from the safe oil tyre business. During the last five years, Nynas’ safe tyre oil business grew more than 50%.
Tyre companies are also expected to develop tyres in tandem with the automobile OEMs’ growing emphasis on CO2 reduction and improved fuel efficiency. “OEMs are working on the reduction of CO2 emissions and increased fuel efficiency, particularly in western Europe and the US, and they are putting pressure on their tyre suppliers to work in the same direction,” said Day. Nynas caters to all tyre segments, including PCR, commercial vehicle and two-wheeler tyres.
Nynas has had a local presence in India for over twelve years and according to Day, currently within Asia, India offers one of the highest growth rates for Nynas. However, there are challenges lying ahead for Nynas in India. The country lacks regulations for the mandatory use of safe tyre oils. Coupled with this, the Indian market is still heavily influenced by price. Day says price sensitivity is however a global factor, and many Indian customers are now making their purchase decision based on the value of the product. “We compete by providing the highest value to the customer, not by providing the lowest price. Prices play an instrumental role in the buying decision, however customers are not ready to compromise on the quality. Although our products often have a higher price, the customer benefits with a better value, in terms of tyre life and performance,” explained Day. Once regulations for safe tyre oils are in place in India, it will fuel demand for naphthenic oil in India, thinks Day.
Two factors, its relationship with global tyre companies, and growing exports by Indian tyre companies will fuel the demand for Nynas’ products in India. “For international companies with manufacturing plants, we can sell our global grades in India. The same grade that they would buy in China or elsewhere in the world. Global companies can have an advantage of standard formulations which they can use across the world.” Today, Nynas supplies safe tyre oils to seven of the top ten global tyre manufacturing companies. However, Nynas has also been successful with local tyre manufacturing companies on account of their growing exports to Europe and the US, where only safe tyre oil is used for tyres. “Many domestic tyre companies are focusing to develop exports to destinations where they need to meet strict regulations on safe tyre oils. That’s where we find business opportunities. In addition, once we start supplying to a tyre company they soon realise the value of our products and they continue to buy our tyre oils,” explained Day.
However, the speed of adaptation of naphthenic oil is a major challenge for Nynas in India. Initially most tyre companies’ safe tyre oil formula was based either on TDAE or RAE, as naphthenic oils were a late entrant to the tyre safe oil segment, not only in India but also globally, with the exception of the US where Naphthenics were already state of the art. TDAE has the advantage of the first entrant into the segment, whereas RAE has a price advantage over TDAE. “However, RAE and TDAE supply is based on feedstock from Group I plants which are steadily closing and TDAE is also expensive. We want to target the opportunity that this will provide. We are a long term reliable naphthenic oils supplier, which is very important to the tyre companies,” said Day.
Since most of tyre companies in India have been using TDAE or RAE, the adaption process to switch to a naphthenic alternative takes around two years, including lab and field testing. “But there is an encouraging response from the Indian market,” added Day.
As a global company, another challenge for Nynas is to work in complex markets, complying with different regulations and policies, “We sell in more than 100 countries, and each country has different regulations and policies which keep us on toes. For an example in India, we had GST introduced last year, so we need to adapt to the new regulation. Multinational companies want to speak centrally with Nynas about their global business, but they also want to be served in each country by local sales and support people. We are in a good position to manage this complexity,” said Day.
GST and demonetisation, which hit many industries hard last year, worked in Nynas’ favour. The uniformity taxations due to GST made Nynas’ products more competitive, while demonetization impacted unorganized players
The trend for Chinese tyre manufacturers to build plants abroad will also benefit Nynas. “Three years ago, we saw the US impose higher tariff duties on Chinese tyres, with many Chinese companies setting up manufacturing facilities in other countries, where we already have a presence,” said Day.