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More tire price hikes are on the way, Ludwig predicts

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“Last month I wrote that due to sharply lower raw material costs during 4Q11 I would not expect to see any further tire price hikes anytime soon (for the full report, click here). Unfortunately that was a wrong call because predictability of future raw material prices is all but impossible,” says tire industry analyst Saul Ludwig in the latest installment of the "Ludwig Report" in Modern Tire Dealer magazine.

“Since the start of 2012 there has been a sharp upturn in nearly every raw material that a tire manufacturer uses. Carbon black is up 20% and others key ingredients such as natural rubber, butadiene and styrene (used to make synthetic rubber), zinc oxide and chemicals all have turned up, too,” he says.

“Yokohama has already responded with an 8% price hike for consumer and truck tires which started Feb. 1 and Conti increased truck tire prices 9% effective Feb. 15. I would not be surprised to see others follow.

“Yes, the consumer has been rebelling about price hikes for everything (have you been to your supermarket lately?), but as to tires, manufacturers need to recover costs if they are to be a solid supplier. Additionally, inventories at tire manufacturers were sharply reduced during the latter months of 2011, so there are few excess products that need to be discounted to be sold. So you may want to build some inventory at current prices as I see little risk of seeing those values depreciate anytime soon. Higher prices may well be on the way.”

(For a full rundown on recent tire price increases, click here.)

Ludwig is a managing director with Northcoast Research Holdings LLC based in Cleveland, Ohio. He concentrates on the tire and chemical industries. Look for the full "Ludwig Report" in each issue of Modern Tire Dealer magazine.

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