The last time I wrote about the best tyre industry innovations in 2021, I thought it would be natural to follow this up with an outlook for the European tyre market in 2022. In short – the market is stranger than ever. As the sea freight costs skyrocketed from Asia to all over the world around a year ago, many importers were uncertain if they would still be able to sell budget tyres, particularly from China in Europe, as the landed costs approached, or in some cases even exceeded, the cost of European produced second and third-tier brands. For this reason, many importers decided to skip not just the winter season imports but also the summer season, and the result is an almost historic shortage of budget tyres. Well, one could say that budget tyres are in the market no more, as the freight costs in some cases could amount to 50 percent of the tyre cost prices, pushing retail pricing into the realm of second-tier brands. Especially for truck and bus tyres, the shortage developing in 2022 is massive, and it’s not limited to Asian products.

As if this wasn’t enough, the cost of everything is increasing as well. Both commodities and raw materials are turning costlier at speeds not seen in a long time, with almost historically high inflation rates in the Euro Zone on the coattails. So, the picture of the tyre market has become increasingly oblique. There are still stocks of tyres from 2020 and 2021 where cost prices were drastically much lower than they are now, and this means that there may be offers of premium brands from 2020 floating around with unit prices for comparable sizes that are actually cheaper than the equivalent from a Chinese brand produced in 2022. It must be confusing for consumers until the stocks are depleted, and the segments normalise. The only difference is that the price gap between premium and budget has become much smaller. So, what will that do to market shares? Only time will tell. But as long as there is a shortage, I’m confident that tyres in all segments will still be sold, no matter what.

As I’m writing this, Russia has invaded Ukraine, and apart from the massive tragedy that it is, it has caused even further disruptions to supply chains, material and commodity availability, and the general purchasing power of European consumers. As the shipping lines to Russia are halted because of the war and massive exodus of foreign businesses in the country, and they are also reduced to US as the port congestion and carrier queues on the West coast have reached unmanageable levels for the carriers, the lines and container availability is expected to ease up a bit for European destination ports, which means that sea freight costs could also be on the way down again. But there are so many factors pulling in both directions that any sane person would abscond from placing large bets on anything.

In Europe, the pandemic is gradually disappearing, and only some countries still have restrictions in place. But the situation is drastically different in Asia, especially China, where new lockdowns are underway, and the virus is spreading like never before since the very first outbreak. Knowing how swiftly the Chinese government shuts everything down and enforces curfews on whole cities when they have just a few infected, it’s very likely that logistics and port terminals will be hampered or closed off completely, and that could knock all stability in the shipping market out once more.

The only thing that is clear so far is that cost complexity for tyre production, supply chain, and distribution has increased by an incredible factor over the past two years. Local production has never had such an advantage over Asian output as it has now. Still, on the other hand, the cost of raw materials and freight costs for said materials have increased tremendously, as have road transportation and distribution costs. The cost of production is growing all over the globe as the cost of electricity and steam supply is also multiplying. However, as salaries are following the extremely high inflation rate, the most automated production facilities still have an advantage over the labour-heavy ones.

All these factors, in the end, affect budget tyres the most, as they are more sensitive to fluctuations in raw material and production costs and are particularly vulnerable to high freight and labour costs. At the moment, budget tyres from China are on par with or above several Japanese and Korean brands, and even second-tier brands produced in Eastern Europe. While this will certainly increase their prices gradually to distance themselves from the budget brands a bit more in terms of pricing, they don’t regulate overnight, and that means that effectively there is no budget segment in Europe for the major part of 2022 barring the second tier-priced brands made in countries all over the world that are usually priced very differently in the market.

I believe I’ve said many times that Chinese tyres are more competitive when the market is enjoying low costs all through the supply chain, as the raw material costs and transportation costs make up for most of the cost structure, while it accounts for a smaller fraction of the cost structure of a second-tier or premium brand tyre – here the heavier cost elements are R&D, testing, marketing etc. which is notoriously lacking in most Chinese tyre cost structures. So, in the current market, one might wonder where the customer segment for Chinese tyre products is as we move further into 2022. Depending on who you’re rooting for, the outlook might be very bleak.

Denka Company Limited announced it would record an extraordinary loss of approximately 16.1 billion yen (£85.8 million) as an impairment on manufacturing facilities at its US subsidiary. It will indefinitely suspend chloroprene rubber production at the Louisiana plant.

The Japanese chemical manufacturer, which holds a 70 percent stake in Denka Performance Elastomer LLC (DPE), cited mounting operational challenges, including unexpectedly high costs for pollution control equipment and declining production volumes at the American facility.

“DPE has faced significant cost, production and other challenges at its facility in the United States,” the company said in a statement. “Rising costs are attributable to, among other factors, identification, design, purchase, installation, and operation of pollution control equipment to reduce chloroprene emissions that DPE did not anticipate being required when it acquired the facility from E.I. DuPont de Nemours and Company.”

The subsidiary was established in December 2014 and acquired the chloroprene rubber business from DuPont in November 2015. The Louisiana facility was intended to serve as a second manufacturing site in North America, complementing Denka’s Omi Plant in Itoigawa, Niigata, Japan.

However, according to the company statement, DPE has struggled with multiple operational issues, including “rising energy costs and a shortage of qualified staff necessary to operate new pollution control equipment and implement other emission reduction measures. “

Production volumes have declined partly due to “operational restrictions arising from the pollution reduction measures and unscheduled plant outages associated with supply chain disruptions and severe weather events,” Denka said.

The company noted that these challenges, combined with changes in the global economic environment for chloroprene rubber, have pressured profitability, making near-term improvement difficult.

Denka confirmed that DPE employs 250 people as of December 2024 and will not restart its chloroprene rubber manufacturing facilities following a regular maintenance shutdown. Instead, “all options for the business, including a potential sale of the business or its assets, will be considered,” the statement said.

The company emphasised that “no decision regarding a permanent closure of the facility has been made at this time.”

Customers will continue to be supplied from current inventories and production at the company’s Omi Plant in Japan.

DPE is 70 percent owned by Denka USA LLC, a wholly owned subsidiary of Denka Company Limited, and 30 percent by Diana Elastomers, Inc., a subsidiary of Mitsui & Co., Ltd.

Yokohama Rubber reported a 56.9 percent year-on-year decline in profit attributable to owners for the first quarter of 2025, despite posting a 9.0 percent increase in sales revenue.

The Japanese tyre maker recorded a profit of 8.53 billion yen for the three months ended 31 March, down from 19.8 billion yen in the same period last year. Business profit fell 3.2 percent to 24.07 billion yen, while sales revenue rose to 275.12 billion yen.

The company maintained its full-year forecast, projecting an 11.4 percent increase in sales revenue to 1.22 trillion yen and an 8.8 percent rise in profit to 81.5 billion yen for the fiscal year ending 31 December 2025.

Yokohama Rubber attributed the profit decline to one-time costs related to its February acquisition of Goodyear’s off-the-road (OTR) tyre business, which it purchased for approximately 143 billion yen.

“Profit from existing businesses was strong,” the company said in its earnings statement. “In addition to increased sales volume for the company’s consumer tyres, mainly in overseas markets, and continued expansion of sales of high-value-added ADVAN, GEOLANDAR, and Winter tyres as well as high-inch tyres, profit was boosted by the MB segment’s MIX improvements and structural reforms.”

The tyre segment, which accounts for 91percent of the group’s consolidated sales revenue, saw a 10.4 percent increase in sales to 250.32 billion yen. Original equipment tyre sales were higher year-on-year, driven by “strong sales in Japan of vehicle models equipped with YOKOHAMA tyres and expansion of shipments for Chinese automakers’ new energy vehicles,” the company said.

Replacement tyre sales also increased, supported by higher sales of summer and winter tyres in Japan, increased sales of high-inch tyres in Europe, and stepped-up sales efforts in Asia.

The MB (Multiple Businesses) segment, which represents 8.4 percent of total sales, experienced a 3.2 percent revenue decline to 23.02 billion yen. This was attributed to lower demand from construction machinery makers in Japan and automakers in North America.

The company described an “upbeat” business sentiment in Japan for the quarter, noting that “a steady recovery in inbound demand and increasing orders for construction and logistics projects compensated for weak consumption by domestic households curbing spending in response to rising prices of consumer goods.”

Overseas, the company observed rising inflation concerns weighing on consumer spending in the United States, while in Europe, “manufacturing industries are rebounding and corporate business sentiment is improving.” In China, personal consumption was boosted by the Spring Festival holiday, but high US tariffs “reduced China’s exports and created uncertainty about the future that is weakening industrial activity.”

Swedish speciality chemicals firm Nynas reported solid financial results for 2024, posting an Adjusted EBITDA of 1,333 million Swedish kronor, marginally higher than the 1,316 million kronor recorded in 2023.

The company, which specialises in naphthenic speciality oils and bitumen products, attributed its performance to operational efficiency and commercial success in its niche markets.

“We are delighted with the progress made during 2024, evidencing our right-sized cost base and a more targeted commercial and manufacturing footprint. We have redefined our strategic direction, positioning Nynas as a speciality chemicals company, enabling the energy transition and setting our course for 2035,” Nynas CEO Eric Gosse said in a statement.

The firm highlighted strong cash generation from operations, which it said would support planned investments and longer-term growth initiatives. Nynas also mentioned the ongoing transformation of its Harburg site with plans to monetise the asset eventually.

All three of the company’s production facilities maintained high operational reliability between 95 percent and 99 percent. The Nynäshamn refinery achieved a notable milestone: in May 2024, it set a new monthly production record for naphthenic speciality oils at 42,000 tonnes.

Strategic pivot towards sustainability

Nynas outlined a strategic shift focused on higher-margin speciality materials with sustainable characteristics. The company aims to strengthen its position in European markets through innovation and sustainability initiatives.

“Nynas is uniquely positioned to contribute to the energy transition. Our strategy reflects our purpose to advance a more sustainable society, and our product development pipeline is fully aligned with this goal," Gosse added.

In 2024, the company received an EcoVadis Gold rating, placing it in the top 5 percent of globally rated businesses for sustainability performance.

With consecutive years of strong financial performance, Nynas indicated it continues to monitor debt capital markets to optimise its capital structure “at the appropriate time potentially”.

The Swedish chemicals producer noted that, having ceased operations in the United States in 2022, it remains largely insulated from recent global trade tensions surrounding US import tariffs. The company imports only minimal feedstock from America, shielding it from potential cross-border trade disputes.

JK Tyre & Industries Ltd has strengthened its position as a leader in sustainable tyre technology and a conscientious partner in India's green industrial journey by commencing production of its ‘UX Royale Green’ passenger car tyres at its Chennai Tyre Plant using ISCC Plus-certified sustainable raw materials.

Developed in August 2023, the UX Royale Green is made with 80 percent sustainable, recycled and renewable materials and was put to rigorous evaluation and testing. The sustainable tyre is the product of more than 10 years of diligent study conducted by the Global Tech Centre of JK Tyre. The company's research and development team has been concentrating on creating sustainable alternatives to traditional petroleum-based products. The certification confirms the usage of traceable, ethically obtained renewable and recycled raw materials and is given under the internationally recognised International Sustainability and Carbon Certification (ISCC +) system. Certified raw materials for the UX Royale Green include steel wire, recycled polyester, recovered carbonaceous black, bio-attributed polymers, renewable oils and recycled rubber powder. All of these products are sourced using circular methods.

Dr Raghupati Singhania, Chairman & Managing Director, JK Tyre & Industries Ltd, said, "The commencement of sustainable tyre production represents a defining step in JK Tyre’s journey toward environmentally responsible innovation. We are pleased to set new industry benchmarks that balance high performance with ecological responsibility. This milestone reflects our ongoing commitment to driving responsible mobility – anchored in green technology, circular economy principles and the delivery of world-class, low-impact products. At the same time, innovation, quality and safety continue to be foundational to our operations."