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LATVIA
Largest Latvian Retreaders Forced to Cut Production Capacities
The Latvian retreading industry is currently caught in a perfect storm, with business heavily depressed by Russian sanctions, the inflow of cheap Chinese tyres and overall reductions of business activity in the country due to the gradual decrease of the population during the last decade.
As a result, two of the three largest retreaders in the country have, over recent years, been forced to cut capacities, and in general, forecasts for the coming years remain quite gloomy. In particular, Marathon, which is believed to be the largest retreading company in Latvia, reduced production volume from 12,000 tyres at the peak of 2014 to 10,000 in 2015, according to company director Anatolijs Ciscakovs.
“We believe for normal operation 8,000 - 10,000 tyres will be enough for us. Last year we had 10,000 and volumes are still going down. Tyre retreading has a seasonal pattern, so we expect the situation will slightly improve in the autumn, but we can say it will be hard to reach 8,000 tyres this year,” Ciscakovs stated.
The situation is much more dramatic for Laneks, which is among the best looking of the Baltic retreading companies, with marble steps outside the building, a good location and a highly automated tyre retreading line. The company is based just on the opposite side of the road from one of its competitors - Juva, but, probably because of a not very active sales policy, its affairs are going backward.
As explained company head Roman Guccic, the retreading
facility of Laneks was commissioned in 2006, and firstly things were going quite well. With an overall capacity of 10,000 tyres per year, it managed to conduct retreading of 7,000 – 9,000 tyres annually. This situation persisted for five years, but after that a gradual decline in demand has begun to cause a reduction in output.
“As a result, during the last year we have managed to retread only 2,000 tyres. We expect operational performance this year to be much worse, so even if we are able to get to 1,000 tyres, we would consider this as success,” he said, adding that with the beginning of the decline in the market, Laneks first had to switch to a part-time working week, while now the facility only works one or two days per week at maximum.
Janis Amolins, spokesperson for retread material supplier Greentread, explained that the main problem facing the retreading market in Latvia is that it is getting narrow and tight. According to him, there are two out of the seven truck tyre retreading companies in the country, which are more dead than alive.
There is also one firm engaged in the retreading of passenger car tyres, but this project is mostly experimental, and it is hard to assess its performance so far. At the same time, Greentread in Latvia is engaged only in selling products for retreading, alongside other sales activities, but not in retreading itself.
“Greentread has retreading facilities in other countries, but we are not planning to launch one in
expansion with the opening of a second sales point in Riga scheduled for August.
Challenges are common enough
The management of both Marathon and Laneks indicate the very harsh market situation as the main reason for the problems.
“It is hard to compare 2007, 2014 and 2015 in terms of the tyre retreading segment. We can safely
companies engaged in carrying goods from the European Union to Russia. The point is that Russian transport companies have mostly not been allowed to operate in Europe, since they don’t match local standards, so European exporters use Baltic carriers a lot. “The thing is that wheels are not rolling, so tyre treads are not getting abraded. As a result, automotive companies are suffering a drop in turnover, and
Latvia at the moment, since the country’s market simply does not have the space for any new retreading companies,” he suggested, adding that despite this, the general situation in the Latvian tyre market is rather stable. With this in mind Greentread at the moment is eyeing business
on the delivery of raw materials, various goods and so on. Secondly, of course, there is the penetration of Chinese rubber into the European market,” said Ciscakovs. Amolins also says that retreaders in the country are mostly focused on the domestic market, where the largest customers were transport
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say there is a serious decline in the market due to two main reasons. Firstly, there is the issue of bilateral sanctions [of Russia and the European Union] with restrictions
we are suffering with them,” Ciscakovs added.
Confirmation of this statement can be seen with the naked eye, as just several kilometres from Riga, on