Hyosung, Kolon’s tire cord plants running near 100% on insatiable demand

The business outlook is bright for Hyosung Advanced Materials Corp. and Kolon Industries Inc., the world’s top two tire cord producers based in South Korea, as global demand for the tire reinforcement material shows no sign of receding amid a supply shortage.  

According to the petrochemical material industry on Wednesday, the two companies’ polyethylene terephthalate (PET) tire cord plants have been operating at nearly 100% lately versus 80% last year.

Tire cords are the material used to reinforce a tire’s durability, driving performance and safety as they maintain the shape of the tires and support vehicle weight.

It is the third most expensive tire material, accounting for 24% of the entire tire-manufacturing cost, after natural rubbers with 27% and synthetic rubbers with 26%.

Its demand, especially for PET tire cords generally used in passenger cars and sport utility vehicles, has swelled lately thanks to the rapid growth of the tire market in China and India.

The utilization rate of passenger car tire plants in China, the world’s largest tire producer, topped 80% so far this year, the highest since 2014, driven by the steady increase in electric vehicle demand in the country and a 20% on-year rise in the country’s tire exports to the US and Europe.

India has grown into the world’s No. 3 car market, behind only the largest China and the second-largest US.

To seize opportunities in India, Hyosung vowed earlier this year to add a tire cord production base in the South Asian country.

Growing demand for large and luxury sedans and SUVs has especially helped boost demand for PET tire cords, said market analysts.

Tires for SUVs and large sedans use an average of 1.5 times more PET tire cords than other car tires.

ROSY OUTLOOK

Tight PET tire cord supply also bodes well for the two Korean tire cord giants, also the world’s top two PET tire cord players.

Kordsa, the world’s No. 4 PET tire cord producer, is the only company planning to ramp up PET tire cord output for now. It aims to add an extra 7,000 tons but the addition accounts for a mere 1% of global PET tire cord production.

“Considering that it takes at least two years to ramp up production capacity, PET tire cord supply is expected to stay at the current tight level without any significant increase for the next two to three years,” said Yoon Jae-sung, an analyst at Hana Securities Co.

“EV demand is expected to remain stagnant for a while but SUV demand is projected to grow steadily, making (PET tire cord supply) run short.”

Hyosung Advanced Materials invested $191 million to expand tire cords’ production lines at its factory in Vietnam in 2022.

Hyosung Advanced Materials reported a 45% on-year decline in operating profit in 2023 to 174.2 billion won on a 17% drop in sales over the same period due to poor performance of its other mainstay businesses such as industrial film unit amid intensifying competition from Chinese peers.

Kolon Industries recently decided to downsize its industrial film business in response to weak demand.

Instead, it has shifted its focus to more value-added businesses such as advanced materials including tire cords.

It also expanded the capacity of its PET tire cord fabric plant in Vietnam in 2022 to meet growing demand. 

Write to Woo-Sub Kim at duter@hankyung.com

Sookyung Seo edited this article.