End-of-Life in China

David Shaw CEO TireIndustryResearch.com

[email protected] +44 208 647 1185 +44 797 128 2336

http://TireIndustryResearch.com Future - Cologne - May 2018 ELT tires in China by David Shaw Slide no 1 of 21 RESEARCH Agenda – 20 minutes (!) China tire industry Retreading Cars and trucks Domestic companies OE and replacement International companies Wider environmental issues Recycling Emissions How much - where it goes Blue Sky legislation Specific projects Self-sufficiency. Pyrolysis End-of-life tires How much - where it goes Only recently become an issue Specific projects How many? Projections for future Q&A State-guidance Feel free to interrupt Happy to respond to questions Make this informal & informative

http://TireIndustryResearch.com Future Tire - Cologne - May 2018 ELT tires in China by David Shaw Slide no 2 of 21 RESEARCH $30000 mill Tire Industry in China Yanchang Petroleum Group Rubber Co. $137.9m Haoyou Tire Co. Ltd. $149.1m Shandong Huitong Tyre Co. Ltd. $164.8m Shandong Taishan Tyre Co. Ltd. $197.8m $25000 mill $24,425m Shandong Wanda Tyre Co. Ltd. $243.3m Xuzhou Xugong Tyre Co. Ltd. $258.9m Shandong Bayi Tyre Manufacture Co. Ltd. $270m Shandong Sangong Tyre Co. Ltd. $292.7m $24045m Qingdao Sentury Tire Co. Ltd. $295m Shandong Rongsheng Tyre Co. Ltd. $370.3m $20000 mill Shandong Yinbao Tire Group $381.9m Prinx Chengshan $656.4m Shandong Zhongyi Rubber Co. Ltd. $450.6m Guizhou Tyre Co. Ltd. $739.5m Sichuan Haida Tyre Group Co. Ltd. $470.3m Qingdao Doublestar Industrial $741m Wanli Tyre & Rubber $526.7m Shandong Yongtai Group. $751m Weifang Yuelong Rubber Group $643.3m Shandong Shengtai Tyre Co. $824m Jiangsu Tongyong Tire Ltd. $651.3m $15000 mill Aeolus Tyre $969m Double Coin Holdings $1065m Triangle Group $1144m (was $2437m) Sailun Jinyu Tyre Co. Ltd. $1258m. 30000 $10000 mill Xingyuan Tyre $1285m Shandong Hengfeng Tyre Co. $1344m

Shandong Linglong Rubber $1346m 봉옹벌셥厥스묏撚 GITI Tire $3131m HAWK Rubber ( ) (209.9m) $5000 mill Sanli Tire (힛적쫴怯) (223.3m) $25500m Long March (浪马) (250.6m) Hangzhou Zhongce Rubber $3395m 검聾厥스 $0 mill 25000 Bayi Rubber ( ) (330.3m) China $23214m Sentury (森麒麟) (391.3m) Joyroad (櫓寧厥스) (439.9m) Haohua Tire (猿빽쫴怯) (444.1m) Yongfeng Tire (湛료쫴怯) (458.2m)Lorem ipsum 20000 Shandong Goform (벌루厥居) (460.1m) Sichuan Haida Tire (愷뇽베댕쫴怯) (501.1m) GST (江苏通用) (502.2m) Wanli Tire (万力) (522.9m) Tianjin United Tire & Rubber Co. (TUTRIC) $112m $35000 mill Haoyou Tire co $120m Beijing Shouchuang Tire Co. $201m Yinbao Tire (陵괜쫴怯) (535.7m) Shandong Bayi $201m Shandong TaiShan $211m Hengyu Technology (뷩倒옰세) (542.0m) $30,648m Xinjiang Kunlun Tire Co.15000 $244m 浦林成山 Prinx Chengshan (657.9m) Qingdao Sentury Tire Co $287m Jiangsu Jiangxi Tire (쉭轅쫴怯) (581.1m) $30000 mill Chaoyang Long March Tyre Co. $316m 双钱 DoubleCoin (889.5m) $27,390m Sichuan Haida Tyre Group Co. $366m Xuzhou Xugong Tyre Co. $394m 恒丰 Hengfeng Rubber Plastics (900.7m) Wanda Boto (万达宝通)(589.9m) Shandong Sangong Tyre Co. Ltd. $461m Guizhou Tyre Co. Ltd. (贵州轮胎) $739.5m Shanxi Suanxi Tyre Co. Ltd. $571m 兴源 Xingyuan Tire (998.3m) $25000 mill Qingdao Doublestar Industrial $878m South China Tire & Rubber Co. $574m Shandong Deruibo $992m Shandong Hengyu. $623m Weifang Yuelong rubber (藿렌禿질厥스) (648.9m) Sailun Co. Ltd. $996m Shandong Wanda Tyre Co. $781m 三角 Triangle (934.9m) Guizhou Tyre Co. Ltd. $1068m Jiangsu Tongyong Tire Ltd. $874m $20000 mill Shandong Shengtai Tyre Co. $1090m 风神 Aeolus (1088.5m) Shandong Jinyu Tyre Co. $1139m 10000 Aeolus Tyre $1408m 双星 Doublestar (1099.0m) Xingyuan Tyre $1557m $15000 mill Shandong Hengfeng Tyre Co. $1580m 赛轮金宇 Sailun Jinyu (1507.6m) Triangle Group $1635 (was $2712m) Double Coin Holdings $1800m 玲珑 Linglong (1583.4m) $10000 mill Shandong Linglong Rubber $1884m 5000 GITI Tire $3756m 厦门正新 CST Xiamen (1804.6m) $5000 mill

Hangzhou Zhongce Rubber $4529m $0 mill 中策 Zhongce Rubber (3128.5m) Bridgestone China 0 普利司通 Bridgestone 中国 China http://TireIndustryResearch.com Future Tire - Cologne - May 2018 ELT tires in China by David Shaw Slide no 3 of 21 RESEARCH OE and replacement

60m 500m Car tire demand in China 2008 – 2016 50m TBR 40m

403m 30m 400m 359m 20m 115 m OE 321m 10m 105m 300m 280m 99.5m Europe NAFTA Asia S America MEAI 241m 89.5m 213m 500m

77.5m Industry Research Tire CRIA & Source: 186m 200m 72.3m 149m 68.7m 400m PCR/LT Replacement 123m 51.6m 100m 46.9m 300m

76.5m 94.2m 117 m 140m 164m 190m 221m 254m 288m 200m

0m 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E LatAm Russia East Europe 100m RoW China NAFTA West Europe West 0m

http://TireIndustryResearch.com Future Tire - Cologne - May 2018 ELT tires in China by David Shaw Slide no 4 of 21 RESEARCH Government environment activity

Blue Skies policies started in early 2017 First targets were heavy fuel oil boilers; factories etc Factories closed if they could not upgrade Low-end tire pyrolysis plants were high on the list Capacity for 7.3mn ELT tires/year eliminated in 2017 (official data) 7 policies for next three years 1. Defence of the blue sky 2. Diesel truck pollution control 3. Urban black water treatment 4. Comprehensive management of the Bohai Sea 5. Yangtze River conservation and repair 6. Water source protection 7. Agricultural and rural pollution control

http://TireIndustryResearch.com Future Tire - Cologne - May 2018 ELT tires in China by David Shaw Slide no 5 of 21 RESEARCH Scrap tires have been off-radar Current ELT situation 2017: around 370mn units = 13.5mn tonnes, growing at 8%-10% annually 2020: up by 50% to 500mn units / 20mn tonnes See next slide Disposal routes (until 2017) Small, family-run collection & recycling - Heavy pollution Very limited retreading - tends to be unprofessional Western brands seeking to build business with fleets crumbed rubber goes into GRG products - up to 5mn tonnes/year Reclaim/recovery quite popular Since 2017 Environmental policies closed small businesses Government seeking to promote retreading Government policies driving investment & research into ELT management http://TireIndustryResearch.com Future Tire - Cologne - May 2018 ELT tires in China by David Shaw Slide no 6 of 21 RESEARCH ELT tire data

Category PCR & LT TBB/ TBR Total Car PARC 2017 170mn 47mn 217 Avg Tires per Vehicle 4 12 Tires in use (mn) 680 564 1,244 Percentage replaced each year (%) 20% 45% Percentage retreaded (%) Zero 2% Annual Waste Tire Amount (mn units) 136 244 380 Waste Tire Output (Tire/Ton) 130 18 Annual Waste Tire Output (mn t) 1.046 13.54 14.59 Source: Ministry of Public Security, as of the end of 2017

http://TireIndustryResearch.com Future Tire - Cologne - May 2018 ELT tires in China by David Shaw Slide no 7 of 21 RESEARCH Government policies since 2017 January 2017: “Guidance for Accelerating the Development of the Re- newable Resources Industry”, • Tire retreading; • Product quality monitoring and management • Research into waste tire rubber powder • New rubber recycling technologies • Thermal cracking production technology.

August 2017” China issued documents on the Waste Tires Recycling Industries, and on solving the environmental problems of the waste industry. Government also released “Retreading Industry Access Conditions”, and “Access Conditions for the Comprehensive Utilisation of the Waste Tire Industry”, requires capacity of no less than 30,000 units.

http://TireIndustryResearch.com Future Tire - Cologne - May 2018 ELT tires in China by David Shaw Slide no 8 of 21 RESEARCH Retreading

Official support from government Tire company chairman say they support it (They don’t really) Real view of tire makers Each retread is seen as a lost sale of a new tire Retread technology, training and skills are minimal Truckers do not care for casings; life can be as little as 20k - 30k km International tire makers gaining some success in bus fleets Beijing (and other cities) bus fleet has many thousands of vehicles Heavily targetted by , Bridgestone and others eg Deppon Logistics trials since 2008, more usage from 2012-2017 Deppon has said that in 2018 it will begin the gradual introduction of retreaded tires across its fleets in 25 cities, raising in use to 30%

http://TireIndustryResearch.com Future Tire - Cologne - May 2018 ELT tires in China by David Shaw Slide no 9 of 21 RESEARCH Dynamic situation March 2018 NPC Member & President of the LinDa Group, Li Xiaolin, proposes “Government Subsidies for Waste Tire Pyrolysis (Thermal Cracking) Power Generation” March 2018 - CRIA urges caution Traditional processes: • Retreading • Prototype utilisation • Vulcanised rubber powder • Recycled rubber • Pyrolysis • Burning for energy recovery is used less in China than elsewhere

http://TireIndustryResearch.com Future Tire - Cologne - May 2018 ELT tires in China by David Shaw Slide no 10 of 21 RESEARCH Pyrolysis gets a bad name High investment but low utilisation - many enterprises fail In September 2017, Vanlead (Wanli) cooperated with Enviro to invest CNY400mn in a 30kt/year waste tire pyrolysis project in Guangzhou (cancelled). In November 2017, Techcent invested CNY700mn in a 200kt/year waste tire pyrol- ysis project in Sichuan. In December 2017, Double Star invested CNY600mn in a 200kt/year waste rubber pyrolysis project. In December 2017, the Sound Group and Jinan Hengyu jointly invested CNY500mn in a 100kt/year pyrolysis project. In January 2018, Beautiful China built a new 100kt/year waste rubber pyrolysis project. CRIA analysis: “Pyrolysis produces carbon black (35%), pyrolysis oil (40%), bead wire (15%), and pyrolysis gas (10%). Apart from low value products, the process also includes environmental and safety risks.” http://TireIndustryResearch.com Future Tire - Cologne - May 2018 ELT tires in China by David Shaw Slide no 11 of 21 RESEARCH Specific projects CRIA says can process rubber by reclaim many times General view that “reclaimed rubber can only be recycled three times.” The CRIA has dismissed this view. Tensile strength of reclaimed rubber must be at least 8.0MPa, and tire makers must use at least 1% reclaimed rubber to meet the production requirements. CRIA: replacing 1 ton raw rubber with 3 tons of reclaimed rubber could effectively alleviate China’s NR scarcity. Top tire makers studying tire recycling with ELT departments Zhongce, Aeolus Wanli, Mesnac Double Star, Shaanxi Double Coin Beautiful China Chongqing

http://TireIndustryResearch.com Future Tire - Cologne - May 2018 ELT tires in China by David Shaw Slide no 12 of 21 RESEARCH Wanli/Vanlead & Enviro

Announced on 20 December 2017 30kt/year pyrolysis with Scandinavian Enviro Systems Environmental legislation (updated in November 2017) Limits use of land to tire production and prohibits chemical processes with a flash point below 60°C Future: May go forward, if new land can be assigned

http://TireIndustryResearch.com Future Tire - Cologne - May 2018 ELT tires in China by David Shaw Slide no 13 of 21 RESEARCH Double Star’s pyrolysis unit Joint venture with Beautiful China On April 3, Beautiful China Holdings Co. Ltd, a Hong Kong listed company, and Eco-Star signed a “non-legally binding” cooperation framework agreement for Beautiful China to invest in two wholly-owned subsidiaries of Eco-Star: Eco-Star is a wholly-owned subsidiary of Double Star and develops recycling technology and equipment. Capacity Four pyrolysis lines, due on stream in H1 2018. Investment of CNY46.66mn Can process 60,000 tons / year of tires Annual production 26,000 tons of fuel oil 22,000 tons of carbon black 7000 tons of steel cord.

http://TireIndustryResearch.com Future Tire - Cologne - May 2018 ELT tires in China by David Shaw Slide no 14 of 21 RESEARCH Chongqing waste tire project

Chongqing Zhongxian Bringing forward its 200kt/year renewable resource distribution platform, Includes 15kt/year waste tire rgranulation line Includes 20kt/year reprocessing of waste plastics The main work on the project is already completed. Due on-stream before the end of June 2018.

http://TireIndustryResearch.com Future Tire - Cologne - May 2018 ELT tires in China by David Shaw Slide no 15 of 21 RESEARCH Shaanxi tire recycling unit

Deheng Environmental Technology Ground-breaking on March 8 for a new “100 ton / year waste tire recycling unit” Location: Liquan County, Xianyang City, Shaanxi Province. Two phases each with a single tire pyrolysis line of 50kt/year The total investment of the project is CNY307mn. Pyrolysis lines wil be fed with ambient granulate Planned annual output is 34,000 tons of carbon black, 12,000 tons of steel cord, 16,000 tons of light oil, 24,500 tons of diesel oil, and 3,220 tons of heavy oil.

http://TireIndustryResearch.com Future Tire - Cologne - May 2018 ELT tires in China by David Shaw Slide no 16 of 21 RESEARCH Conclusions ELT issues becoming more high profile Main tire makers investing in ELT management technologies Huge thirst for information on recycling technologies Opportunities for tires-to fuel projects Pyrolysis getting a bad name Government involvement Blue Skies policies ‘Access Conditions’ on retreaders Encouraging ‘green’ technologies Retreading Current infrastructure is extremely limited Roughly 2% market penetration International majors making limited progress

http://TireIndustryResearch.com Future Tire - Cologne - May 2018 ELT tires in China by David Shaw Slide no 17 of 21 RESEARCH Tire Industry Research News Twitter @TireIndustry Opinion, Commentary, Analysis https://www.linkedin.com/today/author/7706927 Market Research & information China Tire Newsletter (Weekly) Global Tire Industry newsletter (Monthly) Global tire analysis 2017 More coming in 2018 Conference planning Tire technology -Hanover 2018-19 VDI conference

http://TireIndustryResearch.com Future Tire - Cologne - May 2018 ELT tires in China by David Shaw Slide no 18 of 21 RESEARCH China Weekly Newsletter

Return to Contents page China Tire Intelligence report RESEARCH Week ending 18 May 2018

Compiled by Shaw Information Services trading as Contents Section 4: Statistics and data 7 Shandong tire exports rise in Q1 7 Tire Industry Research Section 1: Outlook 2 © 2018 Shaw Information Services Ltd Chinese TBR exports rise sharply 7 US holds hearing for 25%+ Chinese duties 2 CAAM: China commercial vehicle data for April 7 MIIT develops roadmap for low-emission trucks 2 CAAM: Motorcycle production declined in April 7 For subscription enquiries Tire companies hold shareholders’ meetings 2 CAAM: China passenger car data for April 7 [email protected] Section 2: Domestic tire makers 3 Vietnam’s inner tube exports to China surge 7 +44 208 647 1185 Guizhou Vietnam Plant to be on stream in 2019 3 Luxxan releases Five-Year Brand Plan 3 Section 5: Upstream and suppliers 8 www.TireIndustryResearch.com Aeolus answers SEE questions 3 Double Star starts up Intelligent Manufacturing 8 Xingyuan publishes 2017 data 3 Qingdao CB company to be auctioned 8 China and Egypt form JV tire company 3 MOFCOM to hear views on NBR from Japan, Korea 8 Prinx Chengshan man named as top craftsman 4 Zhongtou invests in green rubber production 8 Sailun Jinyu buys Canadian tire dealer 4 CRIA holds Reinforcement Material Workshop 8 Double Star seeks court relief in Toyo case 4 CRIA discusses prospects for rubber additives 8 Tire company assets to be auctioned 4 Six deaths at petrochemical company 8 Wanli helps CRRC develop new traffic tires 4 Hainan to create rubber exchange 8 SLJY holds drift competition ceremony 4 Hainan NR clone improves yield by 30% 9 Rumour: Shengtai and Xingyuan to break up? 4 Silica company increased capital 9 Triangle receives more land compensations 5 Section 6: Retail and online activities 9 Triangle uses funds to buy financial products 5 Double Star works with gas stations to sell tires 9 Triangle organises Indonesia trip for dealers 5 CST builds TMALL tire flagship store 9 Tire Company real estate to be auctioned 5 Huadong Rubber to acquire Longyue Rubber? 5 Section 7: Environment & recycling 10 Huasheng Rubber leases Goform capacity? 5 Qingdao company hit by 2 environment fines 10 SLJY 2017 result: capacity data 5 Section 8: Other activities 10 Wanda Boto passes environmental audit 5 Guangrao Tire Expo opens 10 This newsletter contains information about the tire industry Section 3: International tire makers 6 in China. The information is provided in good faith, but it is AQSIQ releases second list of 3S tire companies 10 not advice, and should not be treated as such. Kumho to hold meeting in July 6 Jinan issues penalties on mismatched treads 10 Without prejudice to the generality of the foregoing Kenda increases investment in Tianjin plant 6 Six tire firms enter Shandong’s Top-100 list 10 paragraphs, we do not represent, warrant, undertake or CST publishes Q1 results 6 Shandong government awards tire companies 10 guarantee that the information in this newsletter is correct, Cooper wishes to develop Chinese market 6 accurate, complete or non-misleading. Tire dealers fined after borrowing CNY60mn 11 We will not be liable to you in respect of any special, indi- Trelleborg promotes Agri tires in Mongolia 6 GRTAE exhibition summary 11 rect or consequential loss or damage. Kenda publishes Q1 results 6 Kumho Tire to dispose of defence business 6 Page 1 of 11 — Week ending 18 May 2018 © 2018 Shaw Information Services Ltd RESEARCH

http://TireIndustryResearch.com Future Tire - Cologne - May 2018 ELT tires in China by David Shaw Slide no 19 of 21 RESEARCH Global Monthly Newsletter

Return to Contents page Global Tire Intelligence report RESEARCH Opinion & commentaries: May 2018 edition: Dateline: 30 April 2018 Compiled by Shaw Information Services trading as News & analysis Tire Industry Research All-Season tires still fall short P3

Ser © 2018 Shaw Information Services Ltd E What’s the future for All-season tires in Europe? Section 1: Investments and closures 19 seasn C inter idEre

et ri ass abe et AA Grades to be required under new EU rules E inter rdi Global regulations on tires Section 2: People 20 E C For subscription enquiries in esistane abe ass [email protected] Section 3: Legislation and government 21 CRIA conference ‘18 P6 +44 208 647 1185 Section 4: New business models 23 CRIA: Tire managers discuss industry issues CRIA Shi Yifeng: Problems in tire companies Section 5: Statistics 24 www.TireIndustryResearch.com CRIA data shows sharp fall in 2017 tire profits Xu Wenying: Key tasks for the CRIA in 2018 CRIA releases 2018 Top 100 rubber companies Section 6: Perspective 27 Section 7: Raw Materials 29 Carbon black going short P10 Section 8: Company information 30 Section 9: Company results 34 WBCSD to promote P11 sustainable NR Section 10: What’s Green 35

8000000mn EU imports of PCR tires (401110) from China by volume (estimated) Rest of EU 7000000mn 2015 2016 2017 6000000mn 49.52m 60.27m 63.8mn (est) 5000000mn About this publication 4000000mn Import-Export data P12 France 3000000mn Italy Spain This document has been prepared in response to demands 2000000mn Germany Netherlands 1000000mn U.K. US imports of tires from China 0mn from the global tire community for insight into all aspects of J F MAM J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D EU imports of tires from China the global tire industry value chain.

Double Star to take P13 a strong need in China for a source of information on the global During conversations with many Chinese people, we identified- control Kumho Tire ment channels. tire industry that lies outside of the official Chinese govern The newsletter contains information about the global tire Furthermore, in conversations with industry analysts, we industry. The information is provided in good faith, but it is not advice, and should not be treated as such. ‘Worst tire in the world’ P15 analyses key developments in the global tire industry. identified a need for a regular publication that explains and Without prejudice to the generality of the foregoing - Goodyear’s G159 About the author. This report is compiled by David Shaw. Mr paragraphs, we do not represent, warrant, undertake or Shaw publishes widely on LinkedIn about the tire industry. He guarantee that the information in the newsletter is correct, has a 30-year track record reporting on the global tire industry accurate, complete or non-misleading. China Tire report P18 at the highest levels. He publishes market research reports; We will not be liable to you in respect of any special, indi- offers a weekly news service and manages conferences globally. rect or consequential loss or damage. April For more information see http://TireIndustryResearch.com Page 1 of 37 — May 2018 © 2018 Shaw Information Services Ltd RESEARCH http://TireIndustryResearch.com Future Tire - Cologne - May 2018 ELT tires in China by David Shaw Slide no 20 of 21 RESEARCH Thank you for your attention David Shaw CEO, TireIndustryResearch.com [email protected] +44 208 647 1185 +44 797 128 2336

RR

http://TireIndustryResearch.com Future Tire - Cologne - May 2018 ELT tires in China by David Shaw Slide no 21 of 21 RESEARCH