synthesis rubber The price rises crazily. Do you think the supplier will expand production?
Wrong! The supplier has reduced production!
Just after the price increase notice was issued, the famous Japanese synthetic rubber supplier Zeon issued a statement that we would reduce production!
Zeon cut 60% of production capacity
On June 11, 2024, Zeon announced that it planned to stop 60% of its synthetic rubber production at its manufacturing plant in Takayama, Shun'an, Japan. The decision will make the group stop producing emulsion by the end of 2026, that is, the end of March 2027 styrene - Butadiene rubber Series 1 (EBSR 1) and acrylonitrile butadiene rubber (NBR) latex.
It is reported that the production reduction plan is part of the medium-term management of Zeon's new factory. In addition, the statement also shows that the production of butadiene rubber will stop after the 2028 fiscal year.
While 40% of the capacity that will continue to operate will focus on "high margin" rubber, including solution styrene butadiene rubber, ESBR 2 and NBR.
As for the production suspension plan, Zeon said that the main reason was that overseas competitors entered the synthetic rubber industry. As a result, the profitability of the chemicals business (PDR and SIS) has declined.
This reason is very familiar, isn't it? In fact, this is the reason that many tire enterprises often mention when reducing production. The attractiveness of the price advantage of emerging competitors to the market has indeed made life difficult for many old companies. At this time, it is one of the few effective competitive strategies to earn high-end areas that emerging competitors have not yet set foot in.
Zeon new capacity planning, more high-end
In the statement on June 11, Zeon mentioned that although it planned to stop the production of emulsion styrene butadiene rubber series 1 (EBSR 1) and acrylonitrile butadiene rubber (NBR) latex in Deshan Plant, it also planned to invest 70 billion yen (3.229 billion yuan) to build a new cycloolefin polymer (COP) production facility in Deshan Plant, with an annual capacity of 12 million tons.
It is reported that the new capacity planning for the Deshan Plant (stopping production of 60% of low profit products and adding 12 million tons of high profit products) will generate "more profits than continuing the current capacity" for the enterprise.
However, due to capacity adjustment and restructuring, Zeon's recent performance may affect its return on investment capital - before the new investment plan reaches production, the production reduction and new investment of Deshan Plant will lead to a "temporary" decline in the return on investment capital.
But Zeon says profits will rebound soon. It is predicted that from 2030 to 2035, the economy will experience a "V-shaped" recovery. This is also conducive to the increase of Zeon's profits.
Zeon overall planning
In other aspects, Zeon said that it would "improve" the existing business of its "chemicals" department.
According to the description, the production capacity of "low profit" products such as isoprene rubber, SIS elastomer, and piperidine based resin (PDR) will slowly shrink, and the future R&D and investment rate of the enterprise will focus on its high profit products.
Zeon said that the chemicals department is an important part of C5 related business, and it is "critical" to continue to carry out business. In addition, in order to improve its competitive advantage, Zeon will ensure its competitive advantage in Japan and North America by reducing tariffs and strengthening customer relations.
Foreign funded enterprises with medium and low-end production capacity stepping on the brake
It has to be mentioned that not only synthetic rubber suppliers, but also Japanese tire enterprises present a trend of "braking" the production capacity of low-end tires and focusing on high-value products. The shutdown of Zeon also further proves that foreign-funded enterprises pay more attention to the stability of profits than the growth of sales.
(Editor in charge: Chen Chen)
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