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Bridgestone puts Thai unit on hold

Bloomberg

Bridgestone Corp., the world’s largest tire maker, will postpone the start of production at a new tire plant in Thailand because global demand for coal-mining vehicles is less than expected.

The company will announce a new output start date “when demand comes back,” Chief Executive Officer Masaaki Tsuya said in an interview Monday.

Bridgestone is adding production capacity for construction and mining vehicle tires, known as off-road, because they have a higher profit margin than car tires, Tsuya said. The company still expects net income to surge 41 percent this fiscal year to a record ¥285 billion ($2.8 billion) as rubber prices near a five-year low hold down costs.

“It will take some time before mining-vehicle tire demand heats up,” Tsuya said.

Appetite for mining and construction vehicles is slumping as a coal glut drags prices to almost five-year lows. Glencore Xstrata Plc said it would stop production from its Ravensworth mine in Australia. Walter Energy Inc. said the company would immediately idle output at its Wolverine mine and suspend its Brule project by July.

Bridgestone’s new plant for mining-vehicle tires was scheduled to begin production in the first half of 2015, with a planned capacity of 85 tons per day by the first half of 2019.

Coal prices dropped to the lowest since October 2009 as of June 13, based on the GlobalCOAL NEWC Index, the Asia-Pacific benchmark.

Tsuya said the coup and political turmoil in Thailand hasn’t affected the planned timing of production. The company’s three existing factories in the country are running as usual, he said.

The new Thai plant is mainly for exports and is Bridgestone’s first for off-road tires outside Japan and the United States. The tire-maker will probably begin producing anti-vibration rubber parts, which make up about 50 percent of sales in Japan, outside the country to boost sales in overseas markets, Tsuya said.