January 27, 2010
Analyzing the tire industry in 2009 and beyond
Tariffs were imposed. Labor negotiations were held. Raw material prices were volatile. Saul Ludwig watched as the drama unfolded. Looking back, he tells us what it all means for our industry
By: Bob Ulrich
MTD: How did raw material costs in 2009 compare to 2008? How will raw material costs in 2010 compare to 2009?
Ludwig: On average, raw material costs decreased by 15.4% in 2009. That compares to an overall increase of 14.7% in 2008 vs. 2007.
Butadiene was down 51.7%, while Styrene dropped 37.6%. Natural rubber and carbon black prices also were down significantly.
Remember, that’s a weighted average. The prices dropped from January through July, but in August started to creep up again.
They actually increased about 20% from the third quarter of 2009 to the fourth quarter. That increase necessitated a round of appropriate price increases by manufacturers.
If the pricing in December were to stay in place throughout 2010, the weighted average of raw material costs would be 10% higher than the average in 2009.
MTD: As always, thanks for your insight, Saul. ■
Ludwig has questions of his own -- The answers will help define our industry, he says
When asked, “What are the areas of concern or interest to watch out for in 2010?” tire industry analyst Saul Ludwig answered the question with questions of his own.
1. How will importers of Chinese tires reposition their supply lines? How will Chinese tire manufacturers reposition capacity?
2. Other than plants already scheduled to close in 2010, will any other plants be closed?
3. Will Pirelli SpA separate its tire business from all its other businesses? How will the Continental AG-Schaeffler Group union hold up?
4. If Goodyear Tire & Rubber Co. CEO Bob Keegan retires in 2010, will there be any strategic shifts under a different CEO?
5. Will Titan International Inc. CEO Morry Taylor see his dream of selling large quantities of 63-inch tires materialize, and will he be able to pull off other farm tire acquisitions he is targeting?
“Global geo-political developments involving terrorism, Middle East confrontations or major financial traumas could have dramatic ramifications for the U.S. economy and the tire industry,” he says. “And economically speaking, we certainly are not out of the woods yet as the growing U.S. budget deficit remains a major concern.”
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