Struggling chemical firms find opportunities amid growing global tire demand

Hyosung Advanced Materials' tire cord / Courtesy of Hyosung Advanced Materials

Korean petrochemical firms are expected to improve their profits this year, due to the growing global demand for tires, according to industry analysts, Wednesday.

Despite the ongoing restructuring of their petrochemical plants to cope with the oversupply of Chinese products, Korean companies have recently been increasing the production of materials for tires.

Kumho Petrochemical recently raised the capacity utilization rate of its synthetic rubber plant to 80 percent, up from 69 percent in 2023. The first-quarter operating profit from its synthetic rubber business also rose 64 percent quarter-on-quarter to 25.1 billion won ($18 million), despite the lingering petrochemical industry downturn.

Hyosung Advanced Materials, the world’s leading maker of tire cord, which is a fabric used to reinforce tires of electric vehicles (EVs), also increased the capacity utilization rate of its Vietnamese factory to 95 percent during the first quarter, up 15 percentage points from the previous quarter. Its first-quarter operating profit soared 206 percent quarter-on-quarter to 63.7 billion won, due to a significant improvement in operating profits from the tire cord business.

Kolon Industries, one of Hyosung’s rivals in the tire cord market, even ran its tire cord factory at full capacity during the first quarter.

The recent boom in the global tire market has been attributed mainly to the replacement of EV tires sold in 2020, as well as the rise in car sales in India and China.

“The general purpose rubber market’s condition is expected to improve,” Hana Securities analyst Yoon Jae-sung said. “This expectation is because of India’s motorization, China’s trade-in program, more transportation of goods by Chinese e-commerce platforms and frequent replacement of tires following a rise in EV penetration rate.”

China has subsidized the replacement of old vehicles and home appliances, in order to stimulate the consumer market's vitality. In addition, EV drivers need to replace their tires more frequently than the drivers of internal combustion engine vehicles, due to the weighty batteries.

IBK Securities analyst Lee Dong-wook forecast that this year’s global tire demand will rise 3 percent year-on-year to 1.76 billion units.

“Following the improvement in Europe’s original equipment tire market last year, there will likely be a growing demand for replacement equipment tires in the continent this year,” the analyst said.