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THE EMIRATES
N Srinivasan, heading plant operation and Ravi Kumar responsible for marketing at Standard Retreads LLC Ajman
Anil Kumar Shetty, Manager, Universal Tyres & Retreading Systems LLC.
Universal Expanding in Africa and the Middle East
Standard Reviving Hot Process in the UAE Market
A key United Arab Emirates based retreader is looking for pan-African presence with plans to increasing its presence in the region. Universal Tyres & Retreading Systems LLC has already set up a retreading facility in Nairobi, the capital of Kenya. Now it plans to build plants in two more neighbouring countries to further expand in the continent. “We are planning to build a facility in Tanzania followed by Uganda. First, we move into Tanzania, where a location has been identified and a plant will likely to be operational by
US$ 2 million for the Saudi plant and plans to import equipment from Newera. Commenting on the strategy of building plants in Saudi Arabia, he said, “Saudi is growing fast with lot of construction work going on around the country to improve infrastructure particularly in the oil field regions.”
Universal is coping with the challenge of subdued market sentiments and worsening payment conditions due to increasing competition from small retreaders operating on low margins in the
August 2014,” said Anil Kumar Shetty, Manager, Universal Tyres & Retreading Systmes LLC. “After this we have finalised a location in Uganda also and this plant will be operational by the first quarter of 2015,” he added. Both upcoming African plants will be of the same capacity. “We are investing around US$ 2 million on each plant including plant and machinery. Both plants will be of identical size and will have a capacity of 150 tyres per day,” said Shetty.
The Dubai based retreading company strongly believes that the African market is growing on the strength of its improving highway network. “Besides a growing road network that brings connectivity among different African states, the infrastructure is also improving with African governments investing in various projects to kick -start the regional economies,” explained Shetty.
The firm is also eyeing expansion in the Middle Eastern market by entering the largest country and biggest market of the region in Saudi Arabia. Universal is planning to build a facility in the Saudi city of Dammam. “The initial formalities are beginning with documentation and the retreading plant will likely be functional by the middle of 2015,” Shetty confirmed. The company has earmarked an investment of around
home market. As a result, it is now increasingly eying growth outside the country in the Middle East and Africa where growth opportunities exist. “The market is slow in the UAE. We have the capacity to produce 150 tyres per day but retread around 100 only. Therefore, we have no further expansion plans in the home market in the near future but we are looking for growth in other countries.” Universal imports containers of tread rubber from Leader (S Africa) and Bremels (India) almost every month.
Now the UAE retreading industry is banking on the announcement of the Dubai Expo 2020, which hopes to pump in around AED 40 billion in building infrastructure to host the event. The UAE government plans to build the expo site, roads, hotels, new tram system etc for the event. The building activity will lead to the moving of the trucks and that gives a fillip to the retreading sector also. “With work on Expo 2020 projects beginning by the end of 2014, the market will likely pick up in response to increasing activity on the project,” Shetty thinks. Development is expected to pick up pace beginning next year and preparations for the event involved two main areas – the development of the actual expo site and the development of the city.
Despite the downturn in the UAE market, the retreading industry keeps on attracting new people. After all it is in the time of adversity when new ideas takes shape and are implemented. The policy paralysis of the UAE authorities towards retreading has once again almost given a new lease of life to the conventional process. When queried about the reason for starting retreading by the hot process, N Srinivasan, the plant manager at Standard Retreads LLC adds, “It’s the cosmetic finish and long shoulders that are properly attached to the tyre leading to the sidewalls that makes that tyres retreaded by the hot process very much similar to new tyres.” Because the tyre looks very identical to a new tyre, the authorities are failing to identify whether it is a new tyre or a retreaded tyre.
Standard Retread LLC was formed in Ajman in early 2005 to retread tyres with the conventional and precure process. “We have revived the conventional method and in terms of quality and price we are competing with the market leader,” stated Ravi Kumar, who is responsible for marketing within the company, who claim to be operating in the high price bracket within the hot process market. Standard retreads tyres with Kraiburg rubber and imports one and half containers almost every second month.
Standard has the capacity to retread 2,700 tyres each month but is currently retreading around 1,500. Around 30% of production is carried out using the hot cure process. The plant also houses some of the best equipment like a buffer and builder from Matteuzzi, two hot presses from CIMA, one 17 tyre chamber from Rajmahaal, patches from Vipal, envelopes from MAE and tyre
accessories from Salvadori.
Giving insight into the UAE market, Srinivasan said, “The UAE market is flooded with Chinese tyres. Earlier Chinese tyres used to be sold around AED 1,200 but their prices have come down to AED 720, eating almost 40 per cent of the UAE’s retreading market.” Interestingly, of the combined capacity of all the UAE companies, almost 50 per cent is laying idle due to the presence of the Chinese tyres.
Contracting companies are delaying the payments to fleet owners, who are further asking for long term credit terms. “Hardly 40 per cent of the new tyres come back for retreading and as we estimate almost 60 per cent of the market is left untapped,” thinks Ravi Kumar. Moreover, long term credit practices of 120-150 days are further killing the industry.
Meanwhile, with market sentiments yet to turn towards the positivity which is expected to come with the anticipated Expo 2020 boom, Standard is also looking for options of growth outside the UAE. When asked for expansion elsewhere within the Middle East, Srinivasan was quick to add, “We are open to the idea of giving technical knowhow initially. The option of entering the market is still a bit away. However, we are open to expanding in other markets like opening a new retreading plant in some other prospective market.” Standard feels that Saudi Arabia is evolving as a good potential market for future growth. “We may look for growth in that market at a later stage,” he added.
46 Retreading Business