Page 14 - CTB N18 - 2017-02

RETREADING
Tyre Rubber Prices Increases May Have a Silver Lining for the Retreading Industry
By Ewan Scott
If you have had to buy a new tyre recently, you may, if you were price aware, have been surprised by the increase in the price. One retailer told
The other impact on rubber prices is market demand. So, when the market calls for more rubber, the prices go up – simple economics. The market
materials, but then they realised that it might not all be a bad thing. If the rubber price was heading upwards then so too was the price differential
and tyre materials prices. Oil prices are also volatile, and at the end of March 2017 Brent Crude was at $52.97 per barrel and rising, whilst production
had just come off a peak in both the USA and Saudi Arabia.
Oil prices are, in part, managed by the producing countries in OPEC, although non-OPEC producers have, in the past, tried to stabilise production and prices favourable to their own economies. Oil prices have been slowly climbing back but it is unlikely that they will reach the heady heights of 2008 any time soon. OPEC is losing its
ability to push prices up as North America accesses Oil Tar Sands and deep resources released by fracking, and Europe finds new deep sea oilfields and also adopts fracking opportunities. Additional pressure on the oil sector may also come with the coming of age of the electric car, reducing demand for petroleum products in the longer term.
It may be that the tyre and rubber manufacturers will do as they have done in the past and hike prices, which they have been forced to hold down due
to the competition from Chinese tyre and rubber manufacturers, but as the raw materials prices fall and the market votes with its feet for lower cost products, prices may well fall to somewhere a little above their past price. That is a trend that all in the tyre industry will recognise.
So, what have the retreaders throughout Europe had to say on this. Do they see an opportunity? Or is this just
another blip on the radar of trade?
There has been a mixed reaction. Detlev Biermann at the German retreader RuLa offered this thought. “Of course, price increases in materials are
This chart shows that rubber prices have been higher in 2011 and 2012 but Jan 2017 shows a sharp increase that could suggest that rubber prices are going to be heading higher.
Commercial Tyre Business, “Tyre prices have rocketed recently, even the Chinese tyres are seeing price increases. Premium brands are as much as 40 per cent higher than they were last year – and the suppliers tell us that there are more price increases to come.” Rubber production is a finite resource, in that there is only so much acreage of rubber plantation and only so much natural rubber that can be
does get confused though by larger players buying stock and even buying futures in rubber, and then dumping stock on the market, or using that stock bought cheaply to maintain cheap production, which in turn impacts upon the market for natural rubber and, of course, for tyres.
So, the current rounds of rubber price increases have changed the dynamics of the marketplace in Europe. CTB was present
between a retread and a new tyre. There may be opportunities to be had for retreaders in this round of price increases.
Rubber prices are volatile and, as with everything, there is a long-term increase that cannot be avoided, but even as manufacturers were upping prices, natural rubber experts were predicting a price collapse by the third quarter. The reality is that by the end of the first
We all know that oil prices have fallen sharply but the trend is once again upwards and that impacts upon tyre materials prices.
produced. The volume produced is climate dependent, and in a bad monsoon year production falls, impacting upon supply, pushing prices up.
with three retreaders when they were advised of the coming price increases. The response was initially that they would have to look for cheaper
quarter of 2017 prices had dropped back dramatically.
Oil prices, of course, also impact upon compounded rubber and therefore tyre prices
14 Commercial Tyre Business