Tire Costs Soar

Tire manufacturers say that a shortage of materials combined with soaring global demand, has driven up costs of commercial tires.

Prices for “natural rubber and, later, synthetic rubbers, increased to unprecedented levels during 2010 and 2011. They have gone up . . . [to] levels which are still unprecedented in modern history,” said Walter Weller, vice president of China Manufacturers Alliance, Monrovia, Calif., which makes Double Coin tires.

“At the same time, steel, carbon black and oil have all increased continuously — not to mention transportation costs,” Weller explained in an e-mail. “The tire industry —right, wrong or indifferent — chose to implement increases in stages over this period of time and, for some manufacturers, more increases are needed, which is why you continue to see them.”

He added: “I would say that the more recent increases are probably a reflection of oil/carbon black/steel price increases than natural rubber.”

In addition to Double Coin, other manufacturers that raised prices include Goodyear Tire & Rubber Co., Akron, Ohio; Bridgestone Americas, Nashville, Tenn.; Yokohama Tire, Fullerton, Calif.; Continental Tire the Americas, Fort Mill, S.C.; and Toyo Tire USA, Cypress, Calif.

Michelin North America Inc. and Hankook Tire America Corp. did not respond to requests for comment by the time this story went to press.

“We see supply being short of demand for the near term — for sure, the next one to two years,” said Donn Kramer, Goodyear’s director of product marketing.

Kramer said that on Nov. 1, Goodyear raised U.S. prices on all brands of commercial tires, retreads and tread rubber by up to 10%.

And although Bloomberg News recently reported that the price of natural rubber has dropped by approximately 50% from its high in February 2011, Keith Price, Goodyear’s director of national media relations, said, “Most tire manufacturers use first-in, first-out accounting, [which results in about] a two-quarter lag on raw material costs on finances.”

“Say we’re buying natural rubber today and it’s lower than it was six months ago; it’s going to take five, six months for that to show up in our product cost,” he said.

Source: Transport Topics