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PANAMA SHOW
Chinese Tyres Once Again Under the Spotlight
The third point, and it may seem an obvious one, is that tyre prices do tend to rise and fall with NR prices, and on the basis of that, Shaw predicted that prices will continue to fall in the coming months.
But there is much more to it than that, Shaw explained, not least a couple of extraordinary circumstances, which have particularly affected the pricing scenario over the course of the last nine months.
The first of these was that in September last year the Chinese
Government enforced vehicle legislation, which led to a doubling of truck sales in China, something which no-one saw coming. This led to a rapid increase in demand and a consequent rise in prices. There was also, said Shaw, a drought in Thailand which restricted the supply of rubber, a situation, which has now normalised. Tyre makers, he explained, have now fulfilled the glut of orders arising from the market situation in China, and are looking for sales again. Prices therefore are coming down and are
By David Wilson
The impact of Chinese tyres on the retreading industry, and in particular, the degree to which price fluctuations have impacted the sector, have received considerable coverage in the pages of Retreading Business. Of particular importance has been the 70 per cent hike in raw materials prices that occurred between September and December last year, and how this appeared to turn the mood of the market from doom and gloom to bright optimism almost in the twinkling of an eye. In the presentation that I made at the Asian Retread Conference last year, and again at Tyrexpo Asia in March, I warned against reading too much either way into short term fluctuations in raw materials prices and suggested that the retread industry should refrain from relying on government support to get the industry out of the mire. The best way for the retreading business to move forward, I argued, was to focus on marketing high quality retread products to the right people and with the right messages, in order to create lasting and sustainable business opportunities going forward.
The whole topic of Chinese tyres was raised again at the recent Latin American Tyre Expo in Panama thanks to two illuminating presentations, one by keynote speaker David Shaw of Tire Industry Research and the other by Walt Weller, Vice President of CMA LLC, a wholly owned subsidiary of Double Coin Holdings. These two speakers brought the problems faced by the retread industry into sharp focus, and offered some further thoughts on how the market might wish to approach the challenges it faces.
Following the rapid hike in rubber prices at the end of 2016, the initial market response was for the industry to suddenly start talking of a great opportunity for retreaders, and it is true that many retreaders, especially those with strong fleet business, are doing well at the moment. However, although the price of Chinese tyres did rise at the end of the year, these prices have not held, and prices once again appear to be on a downward spiral. So, what on earth is happening, and how can the retread industry react?
In explaining the recent volatility
of new tyre prices, David Shaw focussed in on a number of key
facts. The first is that more rubber is
now being used in tyre manufacturing because tyres are getting bigger. At the same time tyre manufacturer revenues are down 17.5% since 2012 making them more vulnerable to fluctuations in raw materials costs.