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TSRC Corporation | 0 Synthetic Rubber’s Future in India Dr. Lee Pei Chou March 16, 2012 CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of TSRC Corporation is strictly prohibited

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Page 1: Lee Pei Chou

TSRC Corporation | 0

Synthetic Rubber’s Future

in India

Dr. Lee Pei Chou

March 16, 2012

CONFIDENTIAL AND PROPRIETARY

Any use of this material without specific permission of TSRC Corporation is strictly prohibited

Page 2: Lee Pei Chou

TSRC Corporation |

TSRC at a Glance

About Synthetic Rubbers

Synthetic Rubber Applications in Automotive Industry

Opportunities of Synthetic Rubber Industry in India

Conclusion

1 1

Contents

Page 3: Lee Pei Chou

TSRC Corporation |

Who is TSRC? Date of Incorporation July 27, 1973

• Largest synthetic rubber company in Taiwan

• Listed on the Taiwan Stock Exchange with market

capitalization US $ 2 billion

Product

E-SBR, BR, NBR, S-SBR, SBC

(SIS, SBS and SEBS) and

Compound

Headquarters Taipei, Taiwan

Manufacturing Sites 9 Sites (Taiwan, China, USA India

&Thailand)

2011 Consolidated

Revenue USD $ 1,900 million

Brand Taipol, Vector, T-Blend

Total Employees 1,300

Web Site www.tsrc.com.tw

2

Page 4: Lee Pei Chou

TSRC Corporation |

TSRC Global Presence

Kaohsiung, ROC

(ESBR, BR, SSBR, SEBS,

SBS, Compound, SIS,

C5-Isoprene, PIP, DCPD)

Indian Synthetic

Rubber Ltd (ESBR)

Dexco Polymers

(SBS, SIS)

Thai Synthetic Rubber

Company Limits (BR)

Taipei, ROC (HQ)

TSRC (LUX)

Polybus Corp.,

Singapore

TSRC(Hong Kong)

Limited., HK

TSRC (Shanghai)

Industries Ltd.

(Compounding)

TSRC(Jinan)Industries

Ltd. (Compounding)

Shen Hua Chemical Industrial Co. (SBR)

TSRC(Nantong) Industries Ltd (SEBS)

TSRC-UBE (Nantong) Chemical Industries (BR)

Lanxess-TSRC(Nantong) Chemical Industrial (NBR)

Nantong Qix Storage Co., Ltd.

Headquarter

Production site

Sales office

Page 5: Lee Pei Chou

TSRC Corporation |

TSRC Plant Capacity

4

Kaohsiung, Taiwan 100

Nantong, China 180

Panipat, India (in 2013) +120

Kaohsiung, Taiwan 60

Rayong, Thailand 72

Nantong, China 72

Nantong, China 30 Kaohsiung, Taiwan 30

Kaohsiung, Taiwan 25

Plaquemine, USA 62

Nantong, China 20

Nantong, China (in 2013) +40

Kaohsiung, Taiwan (in

2014) +30

Gangshan, Taiwan 8

Shanghai, China 10.5

Jinan, China 5

280/400 204

30 30

107/177 16.3 Current /Total

Capacity

Page 6: Lee Pei Chou

TSRC Corporation |

TSRC at a Glance

About Synthetic Rubbers

Synthetic Rubber Applications in Automotive Industry

Opportunities of Synthetic Rubber Industry in India

Conclusion

5 5

Contents

Page 7: Lee Pei Chou

TSRC Corporation |

Natural Rubber and Synthetic Rubber

• Natural Rubber, which is cis-polyisoprene in structure, peaked in Brazil

in the 1870s. Since then, industry in Brazil withered and moved to Asia.

• In 1879, Bouchardat created one form of synthetic rubber, producing a

polymer of isoprene in a laboratory

• In 1909, Bayer succeeded in polymerizing methyl isoprene, the first

synthetic rubber. Methyl isoprene is 2,3-dimethylbuta-1,3-diene.

• In 1910, The Russian scientist created the first large-scale commercial

production of butadiene rubber.

• In 1911, the founding of Ford France and Ford Britain quickly spread

the development of synthetic rubber.

• During World War II, the production of synthetic rubber in the world

expanded greatly, because the world's limited supplies of natural

rubber.

• 2011 natural rubber supply/ demand= 10.7 / 10.5 million metric tons.

The largest demand increases are being seen in China and India.

• Natural rubber and synthetic rubber are both used in tire manufacturing

6 Source: CMAI (2012)

Page 8: Lee Pei Chou

TSRC Corporation |

FA

CT

OR

Factors that Influence Synthetic Rubber

Development

7

• Living standard improvement

• Changes of transportation methods

• Design changes in automotive equipment

• Changes in tire designs and synthetic rubber in other automotive

applications

• Changes in non-automotive usages of synthetic rubber

• Raw material supply and alternative technologies for feedstock

• New regulations on environment, ecology and economy

• New technologies in synthetic rubber or its replacement

Page 9: Lee Pei Chou

TSRC Corporation |

Petrochemical Value Chain

Naphtha

Olefins

Aromatics

Ethylene

Propylene

Butadiene

Isoprene

EDC

EO/ EG

Isopropyl Alcohol/

Acetone

Acrylonitrile

2 Ethyl Hexanol

ABS, BR, SBR,

NBR, SBS

IR, SIS, EPDM

Plasticizers, EPDM

Acrylic Fiber, NBR

PP, EPDM

Dye Stuff &

Intermediates

PVC

PE, EPDM

Glycol Ethers

Ethanolamine

Downstream

product Intermediate

Styrene

Page 10: Lee Pei Chou

TSRC Corporation |

Olefins for Synthetic Rubbers

9

• C2 Ethylene CH2 = CH2

• C3 Propylene CH3 - CH = CH2

• C4s Butadiene CH2 = CH - CH = CH2

CH3

Isobutylene CH2 = C – CH3

• C5s Isoprene, cyclopentadiene, piperylene etc.

• Olefins Synthetic Rubber s &

Plastics

Page 11: Lee Pei Chou

TSRC Corporation |

Major Families of Synthetic Rubber (1/2)

10

Material (Abbr.) Properties Applications

Styrene Butadiene

Rubber (SBR)

Moderate abrasion resistance; good

mechanical properties

Tread in car tires, technical rubber

products (conveyor belts, seals,

profiles); floorings; shoe soles and

heels

Polybutadiene Rubber

(BR)

Excellent strength; outstanding

abrasion resistance; crack resistance Car tires, conveyor belts, crash

protection pads

Nitrile Butadiene

Rubber, Acrylonitrile

Butadiene Rubber

(NBR)

Moderate ozone and weathering

resistance; high resistance to oils,

grease and hydrocarbons;

Seals, hoses for hydraulics and

pneumatics; rubber gloves, elastic

threads, blankets for print cylinders

and rolls

Styrenic Block

Copolymer (SBC)

Soft and flexible with excellent track

and adhesive properties, improved

weatherability and UV resistance

Automotive, personal hygiene, and

packaging, adhesives (especially SIS),

sealants and bitumen modification

application, footwear

Ethylene-

Propylenediene

Rubber (EPDM)

Very good aging resistance; resistant

to dilute acids and non-mineral-oil-

based brake fluids;

Body seals in automotive engineering,

roof and pond sheeting, membranes,

seals, construction profiles, hoses,

floor tiles, belts, conveyor belts, roll

covers

Page 12: Lee Pei Chou

TSRC Corporation |

Major Families of Synthetic Rubber (2/2)

11

Material (Abbr.) Properties Applications

Chloroprene Rubber

(CR)

Good mechanical properties; good

ozone, weathering, chemical and

aging resistance; medium oil and fuel

resistance; high fire retardance

Cable sheathings, hoses, seals,

window and construction profiles, drive

belts, diving suits

Butyl Rubber (IIR) Good resistance to acids, hot water,

glycol, high gas impermeability; high

buffering capacity; ozone-resistant;

moderate mechanical properties

Inner plies for tubeless tires, bladders

for tire manufacture, roof sheeting,

tunnel insulation, hot water hoses,

bearing elements with excellent shock

absorption, inner tubes for tires

Polyisoprene (IR) Low water swell, light tensile strength,

Properties largely comparable with

natural rubber, more uniform, cleaner,

transparent.

Baby bottle nipples, tire, footwear,

motor mountings, gaskets, bushings,

extruded hoses

Polysiloxane, Silicone

Rubber (SI)

High temperature resistance; ozone,

chemical & UV resistant, high surface

tension, clear, non-toxic

Seals, wire& cable, medical,

automotive, adhesives

Polyacrylate Rubber

(ACM)

Heat and oil resistant, good weather-

ability, ozone resistant, poor abrasion

& electrical properties

Adhesives, seals, packaging, caulks

Page 13: Lee Pei Chou

TSRC Corporation |

Tires Tread

Asphalt

Modifica-

tion

Footwear Adhesives

Technical

Goods

Plastics

Modifica-

tion

SBR - -

BR - -

NBR - - - -

SBC - - -

EPDM - -

CR - - -

IIR - - - -

IR - - - - -

SI - - - - -

ACM - - - -

Main Applications of Synthetic Rubbers

12 Source: IISRP & TSRC

Page 14: Lee Pei Chou

TSRC Corporation |

World Synthetic Rubbers Supply by Types

13

Supply (2011) by types (15,965 kmta)

SBR, 5,874

BR, 3,578

EPDM, 1,192

NBR, 718

CR, 424

IR, 794

IIR, 1,262 SBC, 2,123

• India is a natural rubber producer, 4th in the world.

• India is deficient in synthetic rubber production (128 kmta)

• SBR, BR and IIR are 3 major basic polymers; BR 73 kmta and SBR 120

kmta (in 2013) and 100 kmta IIR (2014)

Source: IISRP (2011)

Page 15: Lee Pei Chou

TSRC Corporation |

World Synthetic Rubbers Market by Region

14

Capacity (2011) by region (15,965 kmta) Consumption (2011) by region (14,540 kmta)

N. America, 3049

Latin America,

801

Europe/ ME/ Africa,

2893 Russia,

1621

China, 3539

Japan, 1618

India, 128 Other Asia,

2316

N. America, 1995

Latin America,

854

Europe/ ME/ Africa,

3087

Russia, 539

China, 4678

Japan, 951

India, 501

Other Asia, 1900

India 2005 2010 2015

Capacity 85 113 -

Consumption 233 406 613

Oversupply/ (Shortage) (148) (293) -

Source: IISRP (2011)

Page 16: Lee Pei Chou

TSRC Corporation |

TSRC at a Glance

About Synthetic Rubbers

Synthetic Rubber Applications in Automotive Industry

Opportunities of Synthetic Rubber Industry in India

Conclusion

15 15

Contents

Page 17: Lee Pei Chou

TSRC Corporation |

World Car Sales Outlook

16

1990-99 2000-08 2009 2010 2011 2012f

TOTAL SALES 39.20 49.55 50.42 56.82 58.89 61.39

N. America 16.36 19.01 12.61 13.96 15.22 16.10

Canada 1.27 1.60 1.46 1.56 1.59 1.61

United States 14.55 16.39 10.40 11.55 12.73 13.50

Mexico 0.54 1.02 0.75 0.85 0.90 0.99

Western Europe 13.11 14.48 13.62 12.98 12.80 12.16

Germany 3.57 3.28 3.81 2.92 3.17 3.24

E. Europe 1.18 2.73 2.58 3.14 3.90 4.25

Russia 0.78 1.54 1.47 1.91 2.65 2.95

Asia 6.91 10.97 17.68 22.47 22.50 24.23

China 0.43 3.14 7.32 9.41 10.04 10.94

India 0.31 0.83 1.43 1.87 1.95 2.09

S. America 1.64 2.36 3.93 4.27 4.47 4.65

Brazil 0.94 1.46 2.53 2.69 2.64 2.74

(Millions of units)

Source: Scotiabank, February 27, 2012

Page 18: Lee Pei Chou

TSRC Corporation |

Synthetic Rubber Applications in Automotive

17

Grommet:

• SBR, NBR, IIR,

EPDM or TPV

Bumper:

• SBR, PU

Tire (Trend, Belt Plies,

Side Wall, Carcass,

Inner):

• ESBR, BR, SSBR,

NR, IIR

Bushing

• NR, SBR, BR

Fan Belt:

• ESBR, BR, EPDM,

NBR

Damper:

• SBR, SI, EPDM

Hose:

• NBR, EPDM

Page 19: Lee Pei Chou

TSRC Corporation |

Requirements of Synthetic Rubber in Tires

18

Legislation and Regulation - tire labeling & CO2 emission

targets for cars and trucks

Fuel Economy –Tires play important role; reduced tire rolling

resistance

Safety and Performance- higher temperature resistance and

improved dampening and noise, wet grip, cornering

performance, longevity

Cost

1

2

3

4

Page 20: Lee Pei Chou

TSRC Corporation |

Green Tire Labeling Regulation

Country EU US Japan Korea

Starting

time 2012 November 2010 March 2010 January 2013

Target tires All tires for PV or

CV

Replacement tires

for PV

Summer replacement

tires for PV All tires for PV or CV

Standard

NHTSA

(National Highway

Traffic Safety

Administration)

JIS

(Japanese Industrial

Standard)

Labeling

information

Fuel efficient

class: A~G Fuel efficient

RRC: A~AAA

(9.0 or less) Rolling resistance

Wet grip class:

A~G

Safety

(Wet traction)

G: d, c, b, a

(110% or more) Wet grip

External rolling

noise measured

value (decibel)

Durability

(Tread wear) Noise & tread wear

19 PS:RRC=Rolling Resistance Coefficient; G=Wet Grip; RP=Replacement;

Page 21: Lee Pei Chou

TSRC Corporation |

Tire Drives Automotive Market

20

Safety

Fuel Saving

Longevity

Less Rolling Resistance,

Reduced weight

Better wet grip on

the road, Less

noise

More mileage,

higher abrasion

resistance

More and more regulations demanded enhanced and balanced

performance for Tire

Page 22: Lee Pei Chou

TSRC Corporation |

Green Tire Performance

Low-Rolling-Resistance Tire

Features of

Solution-SBR

(New

Generation)

Key properties

• Different styrene and vinyl levels

• Controlled molecular weight, molecular weight distribution

and branching

• Used in blends for car tire treads to improve grip and rolling

resistance

• Functional groups in polymers allow chemical bonding with

silica filler for winter tires and low rolling resistance tires

• Improved properties and easier processing

• Good resistance to reversion

• Good low temperature flexibility

• Low hysteresis

• Good resilience

• Good abrasion resistance

Page 23: Lee Pei Chou

TSRC Corporation |

TSRC at a Glance

About Synthetic Rubbers

Synthetic Rubber Applications in Automotive Industry

Opportunities of Synthetic Rubber Industry in India

Conclusion

22 22

Contents

Page 24: Lee Pei Chou

TSRC Corporation | 23

Global Population Growth

Million Population GDP

(2011-2015)

2012 2015 2025 AAGR

India 1,205 1,251 1,396 7.8%

China 1,343 1,361 1,394 9.3%

Unit States 313 322 351 2.4%

Indonesia 248 255 278 6.6%

Brazil 205 212 231 3.97%

World 3,314 3,401 3,650 3.3%

Source: US Census Bureau ; GDP from IMF avg 2011 to 2015 (published in Sep, 2011), AAGR= Average Annual Growth Rate

India's current population is 1.2 billion. In the next decade, India will

become the world's most populous country.

Page 25: Lee Pei Chou

TSRC Corporation |

• 5 times- the number by which GDP will have multiplied by 2030

• 2.5 billion square meters of roads will have to be paved, 20 times

the capacity added in the past decade

• In absolute terms, India is 9th in the world in terms of nominal

factory output (its $1.22 trillion)

• The per capita income is near Rs 38,000 reflecting improvement in

the living stands of an average Indian.

Indian Opportunity

24 Source: McKinsey & Company (2010); Auto industry India 2011

Page 26: Lee Pei Chou

TSRC Corporation |

Indian Consumption SR & NR Forecast

25

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

NR, Tyre Sector 661 680 722 783 850 897 950 1010 1046 1093 1152 6%

NR, Non-Tire

Sector 283 284 295 308 329 342 358 383 397 414 447 5%

Sub-total 944 964 1,017 1,091 1,179 1,239 1,308 1,393 1,443 1,507 1,599 5%

SR, Tyre Sector 145 143 156 164 166 178 189 210 214 221 248 6%

SR, Non-Tire

Sector 261 285 342 414 452 513 570 625 636 661 687 10%

Sub-total 406 428 498 578 618 691 759 835 850 882 935 9%

Total of Rubber

Consumption 1,350 1,392 1,515 1,669 1,797 1,930 2,067 2,228 2,293 2,389 2,534 6%

Unit: 000’ metric ton

Source: IRSG (December)

Page 27: Lee Pei Chou

TSRC Corporation |

• Today, automobile sector in India is one of the key sectors of the

economy in terms of the employment. Mega trends shaping the

Indian passenger vehicle industry'.

• The market value of automobile industry is more than US $ 8b, 5%

contribution of Indian GDP and will be double by 2016

• 7th position automotive producer in the world with being #1 in two

wheelers and #4 in commercial vehicles

• Withstanding a growth rate of 13% per annum and an annual

production of more than 2 million units

• The country's passenger vehicle sales and production is expected

to grow by 14 to 16% over 2011 to 2021, reaching over 9 to 10

million units annually.

• India becomes not only a regional base for small car production,

but also an exports hub to other emerging markets. The automotive

sector has been contributing its share.

Indian Automotive Industry Overview

26 Source: McKinsey & Company (2010); Auto industry India 2011

Page 28: Lee Pei Chou

TSRC Corporation |

Snapshot of Indian Tire Industry

• Strong domestic manufacturing capabilities (39 tire companies and 60 tire

plants; tire turnover (est.) US $ 6b in 2010)

• Self sufficiency in all categories of tires

• 62% of total Natural Rubber (NR) produced in India is consumed by the tire

sector.

• Vibrant sales and service network across the country

• Strong attractions for foreign investment

27

Category 2004-2010

CAGR (%)

2010-2014

CAGR (%)

Truck & Bus Tyres 9.1 10.0

Passenger Car Tyres (Radial) 18.2 16.0

Light Truck Tyres 8.9 11.0

Total 4 Wheelers 11.6 12.0

Source: Automotive Tyre Manufacturers’ Association (ATMA) (2010)

Page 29: Lee Pei Chou

TSRC Corporation |

Synthetic Rubber Shortage in India

28

No Production Gap in Tire Industry

▪ SBC

▪ BR (Green Tire)

▪ SBR (Green Tire)

▪ EPDM

▪ IR

▪ SBR (Tire Grade)

▪ IIR

▪ Rubber Chemicals

▪ Steel Tire Cord

▪ Nylon Tire Cord

▪ Polyester Tire Cord

Page 30: Lee Pei Chou

TSRC Corporation |

Conclusion

29

Economics • Fast economy and population growth will accelerate

automotive industry

• Rapid development in Infrastructure and pavement

• Local auto and tire manufactures are ready for the synthetic

rubber to boost

• Tire production in tandem with auto growth

• Value chain already established

Automotive

Synthetic

Rubber • Currently India relies heavily on import of synthetic rubber

• Consumption of synthetic rubber will go up remarkably

• Commodity rubbers, such as SBR, BR and SBC first, followed by

specialty types

• GDP Auto Industry Tire Industry Rubber Industry

• Population Market Size Total Economy

Page 31: Lee Pei Chou

WORKING DRAFT

Last Modified 08/08/2011 1:46:57 PM Taipei Standard Time

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