Vietnam: Hot Cure Remains Tops

I had a slight argument with the immigration officer at the Ho Chi Minh airport as he insisted on stamping my passport on a new page whereas I wanted him to stamp on the corner of any of the already used pages. Finally, I won and he agreed to leave one page blank to be used for future visas. While moving towards picking up my luggage, I saw that all of the duty free shops were closed. It was a surprise, as duty free shops seem to be open at all the airports at all times. This was the first sign of the communist regime, as it may not be so prepared to capitalise on trade.

Outside the airport, the country manager of Newera shakes my hand and waves me towards the taxi. And we head for the hotel. To my utter surprise, Ho Chi Minh is a modern city with high rises, malls with best of the western brands like Armani or Gucci; wine shops line up one after another and there is a good night life. It looks like any other capitalist state. Whilst checking into the hotel, I saw westerners particularly Americans and Europeans everywhere around the hotel; the Americans perhaps nostalgic about their past experience during the Vietnam War. Getting ready for my first assignment next morning, I went onto my room's balcony and saw ships with tourists moving up and down the Saigon River. It was a beautiful sight, while down on the streets, office-goers were rushing towards their offices on two wheelers.

On the way to my first appointment, Dan Van Luong, my guide, said, "Retreading is new to this country and the greater part of the market is still hot cure. Precure has been introduced but it still has to go a long way to overtake the hot process." Interestingly, Vietnam is a one million strong new bus and truck tyre market annually but barely 6,000 to 7,000 tyres are retreaded each month. Around 1,500 tyres are retreaded by the cold process and the majority by hot process. Vietnam's largest tyre makers Casumina, SRC and NDR also retread tyres by the traditional process along with couple of Taiwanese companies.

While driving by road towards Binh Duong Province, it was observed that the socialist government has begun to develop the road infrastructure in the country. It is surprising that the government has built a number of industrial parks with good internal road networks, but the public highways have been left behind in terms of development: That makes it difficult to reach those parks as the approach roads are not in good shape.

"The government is building the national highway network and this should go a long way towards improving the status of the fledgling retreading industry. The improved road network should help in preserving the casings at a standard good enough to retread," said T H Yew, Asst General Manager, Hocom Rubber Technology Pvt Ltd. Some of the national highway projects on the verge of completion are Ho Chi Minh to Baria Vungtan, Ho Chi Minh to Dongnai Province and Ho Chi Minh to Central Vietnam. If road infrastructure needs to be improved then overloading also has to be stopped to save casings for retreading.

"There is an increasing incidence of overloading in Vietnam. Unless traffic authorities ban overloading and implement the law strictly, so that drivers become aware of maintaining tyres, the situation may not improve," claims Pho Giam Doc, Vice Director, NDR. Vietnamese authorities only allow 13 tonnes on trucks whereas, in violation of all traffic rules, truckers load as much as 40 tonnes. "We are not getting good casings with this kind of loading. Moreover, the government does not allow the import of old casings, playing spoil sport in the growth of retreading industry in Vietnam," Pho complained. It was agreed by all the retreaders that the market has the potential to become sizeable in the next five to eight years with the improvement in road infrastructure.

Commenting on the potential of the market, Adam Low of Future Trade recounts; "Retreading is new in this market and it will take some time to mature. It was a bias ply market till 2007, which is the reason for it being a hot process market". By independent estimates, Vietnam has a majority of 70 per cent bias ply tyres in the market and 30 per cent radials. Unless more radials enter the market, the precure version will remain the poor cousin of the traditional process. Interestingly, it was American trucks running on the Vietnam highways that brought in radials and that may have led to the ushering-in of precure retreading in Vietnam.

The tyre and rubber business is largely confined to Ho Chi Minh City. Vietnam has about a dozen hot process retreaders and around five precure retreaders. Despite the small size of the market and struggling retreading industry, a couple of retreading companies are very optimistic about the future with the improving road infrastructure. They are planning to set up cold cure plants in Ho Chi Minh and couple of them are looking towards the north of the country and cities like the country's capital Hanoi. Kim Long anticipates better times for retreading and plans to open a new plant in the Capital.

"There is currently no retreading plant in Hanoi, which is the second largest city in Vietnam. We are surveying the market in Hanoi," Dan informed. The government is improving the national highway network company is likely to set up the plant in early 2012.

"All the tyre making and retreading units are located in and around Ho Chi Minh City and the distance between Ho Chi Minh and Hanoi is about 1,800 km. Therefore, it is really going to be good to have a plant there," he reiterated. The setting up of new precure plants is a positive step towards securing a firm footing for the retreading concept here.

It was noted that the Taiwanese based rubber companies are bullish about the Vietnam market and are investing heavily in the rubber industry of the country. They are all hoping to reap a rich harvest in the years to come. They find cheap labour and low production costs in this country. Taiwanese companies are financially strong and bring in the latest machinery and ideas to this technology starved country.

Moreover, machinery suppliers like Newera are quite popular among retreaders and they must be aware that there will be future orders here from this developing market. Despite a growing domestic rubber industry, Malaysian tread brands like Kayel and Eversafe are the most popular choices in Vietnam at present. Taiwanese entrepreneurs have entered Vietnam to tap the low end market. Some of the Taiwanese immigrants closed down their factories in their homeland and relocated to Vietnam and now a number of tyre retreading plants are owned by people of Taiwanese descent.

"We had a thirty year old retreading plant in Taichung, Taiwan. We believed that Vietnam has great potential and therefore, shifted base," says Huang Chien Ling, General Manager, Sunhome Industrial Co Ltd. The retreading plant based in Binh Duong Province retreads around 1,000 tyres per month. It has been widely agreed that Vietnam is still in its first stage of retreading development as the majority of the plants are hot cure units. Although cold cure has been introduced it is still a poor cousin of the traditional process. The precure process is in its initial stages of introduction in Vietnam and may take several years to catch up with the hot process.

"We retread 850 tyres by hot process and about 150 tyres by the cold version," said Ling. Explaining further, he said, "It is the bad condition of the casings that has become the major obstacle in getting the market matured for the cold process." With the size of the retreading market still very low, retreaders are finding different ways to survive by foraying into other areas that support their retreading operation too. "With retreading not picking up, we forayed into manufacturing Fork Lift tyres. We are now focussing on our new line of business, which started around seven years ago. We cater to the local market as well as the exporting them to Taiwan," Ling informed. The joint retreading and forklift tyre making unit manufactures 800 tyres per month.

As with other retreaders, Sunhome is also optimistic about the future of retreading in Vietnam and looks forward to the improvement in the country's road infrastructure. "We will remain in the business as it is likely to pick up in the next five years," Ling assured. Sunhome imports about two containers of tread from Taiwan every alternate month and runs the plant on a 13 tyre chamber brought from Taiwan.

(Issue 2011/2)