High fuel prices impact tire demand, Ludwig says

May 27, 2011

"Besides my regular channel checks with tire dealers and manufacturers, I speak often with suppliers of raw materials including producers of synthetic rubber, carbon black, steel cord and polyester,” says Saul Ludwig in the latest installment of the "Ludwig Report" in Modern Tire Dealer magazine. "Their message is that they cannot keep up with demand from tire manufacturers."

"And that is not just a U.S. comment, but a global one," Ludwig notes. "Tire manufacturers are still struggling to keep up with your demand because their inventories are too low.

"So I am not surprised when I continue to hear dealer complaints about supplier fill rates — although the shortages are not as acute as they were last year.

"It is clear, however, that dealers who have been loyal to their supplier (vs. ones who buy from deal to deal) are getting the best service levels. With gasoline prices now in the $4/gallon range, I do expect to see some back-off in car driving, so consumer tire demand in the second half of 2011 may be a bit less than my initial expectations," he says.

"Truck tire demand will still be strong all through this year."

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.