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SRNA: January Shows Momentum for 2021

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One big headwind facing the tire industry is the added cost of shipping tires into the U.S. right now. Tiremakers and importers are paying premiums of $2,000-$4,000 on every container of tires. Darren Thomas, senior vice president and chief operations officer for SRNA, says the "prevailing risk to price right now is going to be freight."

In the latest dealer forum hosted by Sumitomo Rubber North America Inc., the maker of Falken-brand tires says January results point to plenty of hopeful signs for the rest of 2021. Here’s a roundup of five things to watch.

Overall picture: In presenting a round-up of 2020, Rick Brennan, vice president of marketing, says the industry “recovered quite nicely” after dramatic drop-offs in early spring, when the pandemic forced community lockdowns and a brisk stoppage of tire production. SRNA estimates the overall passenger and light truck market was down 7%. (It’s an estimate because the tiremaker doesn’t have final import numbers.) “We recovered quite well because we were down 50-60% in the March/April timeframe.”

And that recovery has extended into the start of 2021, Brennan says. “We had a good January overall. We expect the industry had a pretty good January, as well.”

Commercial truck tires: Bob Klimm, director of sales for SRNA’s truck tires, says the “recovery that started in July and gained steam as the year went on continued into January.

“The overall commercial market looks to be up fairly significantly for January. We finished January up 26% above last year — our best January ever.”

Commercial market backdrop: Klimm says the primary indicators that feed the commercial tire market — construction, manufacturing and agriculture — all are showing good signs so far for 2021. Construction is expected to make a “slow, long recovery,” with residential building serving as a bright spot. As of December, manufacturing was up for seven straight months, and Klimm says even without the final numbers in the trends are showing January will extend that to eight consecutive months of recovery. And agriculture markets look “fairly bright for 2021.” As restaurants open up and stock up and COVID-19 vaccines are distributed on a widespread scale, Klimm says there’s an expectation of a boost in demand for high-value agricultural products in dairy, meat and poultry.

All of those conditions bode well for trucking, Klimm says. Freight tonnage in December was up 7.4% over the month prior. “That’s a huge number (and it) also looks pretty good for January.”

He said the COVID-19 Truck Freight Recovery Index by FTR showed January was off to a strong start, with the first week in January “marking a pandemic high mark for freight.”

Consumer tires: Matt Leeper, vice president of sales for SRNA, says the company saw strength in all of its divisions in January: motorcycle tires, truck tires and consumer tires. (Original equipment sales were flat, but disruption in vehicle production contributed to that.)

Leeper categorized January as strong for the entire tire industry — “likely double digit increases.” He says SRNA “did see a slight reduction in fresh orders” during the month, but that’s also consistent with the norms of the seasonal business. Plus, that helped the company “put a dent in backorders.”

Pricing trends: Going into the fourth quarter of 2020, Brennan says there were pricing fluctuations, especially in tier three and tier four tires, “but in the last 60 days, we’ve seen constant pressure to go up.”

Price increases for manufacturers in those tiers ranged from 6% to 17% and those higher prices are just starting to be reflected in wholesale prices, Brennan says. With tariffs now at play on tires from South Korea, Taiwan, Thailand and Vietnam, many of those products are also arriving in the U.S. behind schedule due to shipping delays, higher demand for shipping containers and space on vessels. That’s prompting re-negotiations of price in tier three and tier four.

Brennan says the price increases for tier one and tier two tires ranged from 3% to 7% and those higher prices are also hitting the marketplace on both the wholesale and retail side.
 

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