The global tire market has been on a bit of a roller coaster ride. Thanks to surging costs of raw materials, it has been registering a price increase of around three to five percent, on average almost every month. It is not just the Chinese tire companies alone, that have increased the prices of their products, but rather this steep increase is indicative of a worldwide trend.
Raw Material Pricing
As with all other commodities, the price of raw materials determines the tire production cost. Many sectors were working below their optimum capacity during the initial lockdown. In fact, petrochemicals, rubber, steel, and other industries could not meet the demands of the tire industry. Add to that the fact that their prices were also unstable, during the first wave of the coronavirus.
The lack of an uninterrupted and stable raw material supply led to an increase in tire prices, all across the board.
Thus making tire replacement costs unacceptably high for many prospective buyers. In fact, many people conducting an online tire price comparison came to the same conclusion and adopted a ‘wait and see’ approach before making any new tire purchases.
Freight Prices
This is an oft-neglectedpart of commodity prices. The lockdown meant that many containers were stuck at ports, or in transit while awaiting their turn to unload their cargo. This issue became a major problem with Chinese goods because many containers left Chinese ports but few returned in time.
The ensuing backlog led to a massive rise in freight prices, which became another contributing factor to rising tire costs. The Chinese New Year also contributed significantly to this increase, as the country was busy in its annual celebrations this Feb, March.
All of these factors contributed to high tire replacement costs in the first few months of this year.
Consumer Demand and Supply Variables
As lockdown-related restrictions were eased, the world’s economy slowly started going back to normal. This led to an increased demand for vehicle tires. More demand and very high raw material costs inevitably led to increasing prices, month after month.
But the situation has started to stabilize as factories all over the world commenced functioning normally. Goods have now started to flow from the manufacturers to the consumers on a regular basis.
The Outlook for the Coming Future
Many nations are aggressively vaccinating their adult population in a bid to dispense with the need for further lockdowns altogether. The UK in particular has already vaccinated around 50 percent of its population and it is looking forward to near-total normalcy.
As raw material prices have stabilized and consumer demand is coming back to normal levels, the tire industry will follow suit. In the coming months, it is quite likely that we will see increased stability and even a possible decrease in the current high tire prices in the market.
Conclusion
At the end of the day, the tire industry is heavily dependent on the global economy. As long as there is ‘consistent’ demand for their products and raw material prices remain constant as well, it is likely that prices will remain stable. Alternately, they might even come down due to competition and other factors, such as an end to the freight deadlock.
