Rising carbon black and steel prices may result in rising tire manufacturing costs.

Rising carbon black and steel prices may result in rising tire manufacturing costs.

Can we expect tire prices to rise soon? It looks like the prices of at least two key raw materials in the tire building process may be on their way up.

Carbon black prices already have been rising. But steel pricing is a wild card. Final approval of tariffs proposed by the U.S. Commerce Department is in the hands of President Donald Trump. If he agrees with the recommendations, steel/steel product imports may drop. And if domestic production can't keep up with demand, steel prices may increase dramatically.

According to General Steel Corp.'s "Annual Steel Building Price Forecast," demand will outpace supply over the next three years, starting with 2018. The forecast cites China's decision last year to reduce its steel production by 20% as the reason. (General Steel says the Chinese economy, by design, is shifting away from manufacturing and infrastructure and toward services.) Because China is the largest producer of steel in the world, its decision to reduce production is significant. Less exporting from other countries would only compound the lack of supply in the U.S.

As part of its forecast, General Steel predicts steel prices will go up slightly in 2018 and then level off. But it does not appear to take into account duties on imported steel.

Carlstar Group LLC already has raised prices on its wheels and steel wheel components because of the "significant volatility in the prices of steel and aluminum materials due to supply constraints."

As for carbon black, Nick Mitchell, a managing director and research analyst with Northcoast Research Holdings LLC, expects tight conditions for multiple years.

"Given the lack of capacity coming online and the time it takes to construct a new facility/expansion, we believe the carbon black industry is in for very tight utilization that extends into at least 2019 if not beyond," he says.

The next wave of tire price increases may be just around the corner.

Author

Bob Ulrich
Bob Ulrich

Editor, Retired

Editor Bob Ulrich has earned a reputation as an industry expert thanks to his insightful, in-depth articles and blogs on the tire industry. Before joining Modern Tire Dealer in 1985, Bob earned a B.A. in English literature from Ohio Northern University. Also, he graduated from the University of Akron School of Law with a J.D.

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Editor Bob Ulrich has earned a reputation as an industry expert thanks to his insightful, in-depth articles and blogs on the tire industry. Before joining Modern Tire Dealer in 1985, Bob earned a B.A. in English literature from Ohio Northern University. Also, he graduated from the University of Akron School of Law with a J.D.

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