ShengdaTech, Inc. ("ShengdaTech" or the "Company") (Nasdaq: SDTH), a leading manufacturer of nano-precipitated calcium carbonate ("NPCC") in China, today commented on the Tire Industry Policy (the "Policy") issued by the Ministry of Industry and Information Technology of the People's Republic of China ("MIIT") on September 15, 2010.
The Company produces NPCC for a wide range of manufacturing applications, including products used in the production of a variety of tire types. For the three months ended September 30, 2010, sales of NPCC from customers in the tire industry accounted for approximately 27.0% of the Company's total net sales.
According to Mr. Xiangzhi Chen, Chairman and Chief Executive Officer of ShengdaTech, "Because the tire industry is a key NPCC application area for the Company, we thought it important to respond to the new policy so that our shareholders would understand our very positive position on this matter."
The Chinese government has been advocating the transition of production from bias tires to radial tires since 1996. At the end of 2008, radial tires accounted for 70% of total tire output. The Policy aims to further improve China's tire industry by promoting technological improvements and structural upgrades.
The Policy encourages the development of high-performance, environmentally friendly radial tires, giant off-the-road ("OTR") tires, wide cross-section, flat-radial passenger-car tires and inner-tube-free radial tires for trucks. The Policy restricts development and production of bias and inner tube tires. MIIT will only issue new bias tire production capacity for aviation tires and plans to phase out plants producing less than 500,000 units per year of truck and bus bias tires. It is expected that by 2015, the proportion of radial tires for passenger vehicles will be 100%, for light trucks 85%, and for trucks 90%.
"China's bias tire market was one of our earliest NPCC application end markets; however, we realized many years ago that the transition to radial tires was inevitable. Consequently, we have successfully planned and implemented accordingly to move effectively with the product-mix changes in the market, both in demand, and, in this case, government policy. Over the past two years, we have gainfully penetrated the radial tire market, and we currently supply NPCC products to four product categories: steel radial tires, off-the-road tires, bias tires and powered-vehicle tires including tires for motorcycles, bicycles and handcarts. For the three months ended September 30, 2010, sales from the bias tires application only accounted for 20% of our total sales to the tire industry. The sales from steel radial tires, off-the-road tires and powered-vehicle tires contributed 45%, 20% and 15%, respectively, to our total sales from tire industry applications," commented Mr. Chen.
"We will continue to focus on the tire industry as an important NPCC end market with strong growth potential driven by increasing demand for automobiles in China, the largest automobile manufacturer in the world in 2010. With the technical expertise of our world-class R&D team and market-leading NPCC production technology, we are confident in our ability to continue to broaden our NPCC application to even higher-grade tires, including semi-steel radial tires." Mr. Chen added.