Dunlop, Michelin re-entrance difficult as ‘Tokunbo’ import, dwindling rubber supply worsen

Despite the coming on board of the new automotive policy, the hope of return of the major tyre manufactures – Dunlop and Michelin – as well as emergence of new players to Nigeria’s manufacturing space could be difficult as import of second-hand tyres, often called ‘Tokunbo,’ dwindling rubber supply, low international rubber prices as well as poor power supply have continued to go from bad to worse.

Michelin, a French tyre maker, closed down its manufacturing plant in Port Harcourt in 2007, owing to harsh business environment, notably increase in second-hand tyre imports, smuggling, high energy cost, among others. Later in 2008, Dunlop, now DN Tyre, shut down its plant after recording N2 billion loss, owing to infrastructural challenges, which made it difficult for it to cover overhead and variable costs and pay back loans borrowed from some banks.

Recently, there emerged some indications that the two players would return to local tyre making.

In an exclusive interview with Real Sector Watch, Olufemi Babayemi, company secretary, DN Tyre and Rubber plc, said the company would be ready to return to tyre making if the government could bail them out of debts, praying that her firm’s discussion with the National Automotive Council would be fruitful. Currently, DN Tyre is involved in tyre imports rather than manufacturing, Real Sector Watch gathered.

On the other hand, there was an indication late last year that Michelin could return as the Federal Government has offered tyre manufacturers a five to ten-year tax holiday as part of its commitment to the new automobile policy.

However, findings have shown that low yield in plantations and dwindling international prices could discourage entrants. The price of rubber in the international market fell 50 percent in April this year, while the international price nosedived to $170 per ton, from $350.

“Dwindling supply of rubber from rubber trees is putting further pressure on the industry. Raw materials which are the lumps from rubber trees are in short supply because most of the trees were planted in the 1960s and they have a life of 30 years,’’ said Ede Dafinone, CEO, Sapele Integrated Industries, in an exclusive interview with Real Sector Watch.

Stakeholders add that smuggling and second-hand tyres, which put the two giant tyre makers out of business, have worsened, while power supply outage to industrial zones has risen to 8.3 hours per day by the second half of 2013 (H2 2013), from 7.8 hours per day obtained by the first half of the same year (H1 2013).