The more and more persistent noises emanating from certain transporters are now proving to be true: the replacement tyre market is under more strain than ever. And although manufacturers dare not yet talk of a shortage, it is quite clear that demand is outstripping supply, that stocks are lower and that prices are rising. The specialists are advising fleet managers to buy now, and to re-tread!
At the basis of the lack of anything lies an imbalance between supply and demand. The new tyre production capacity had been reduced during the crisis, following the closure of certain factories (Continental’s close to Hanover along with Bridgstone’s in Japan). The gradual retreat of Chinese tyres, whose offensive has been substantially slowed in the wake of quality problems, has also incited the major manufacturers to reduce their production of ‘budget’ in favour of ‘premium’ brands, which carry higher margins.
Demand up 33% in a year
Demand for new tyres has been increasing, however. On the one hand because the production of heavy trucks and semi-trailers has largely recovered, and on the other because existing fleets are all out on the road. The situation is aggravated by the fact of having cannibalised those vehicles left in the car park in 2009, increasing demand for tyres even more today. The demand for replacement tyres has therefore soared by a third between the first quarter of 2010 and the same quarter in 2011. And it had already grown by 17% in 2010. Demand for tyres to be fitted to new vehicles had increased by 66% in 2010.
Maximum production, minimum stocks
In 2011, production factories are all running at full capacity, and certain brands are having to make strategic choices at a global level. In the case of Bridgstone, for example, the temporary closure of certain markets in Japan, the explosion in the Asian markets – China and India leading the way – have caused a temporary retreat from the European new-fit markets. All of this is to the benefit of other brands… but then theses tyres are not available for the replacement market either.
Another important factor is that stock levels were reduced to a minimum during the financial crisis, and these stocks have not been sufficiently replenished since. The result of this is that independent distributors are not receiving the stocks they require, and that no-one dares make any annual plans any more.
Inflation in view
Is it pure chance that this so-called lack comes to light just at the moment when the price of tyres is rising so much ? Those of a sceptical nature might be persuaded to think that the lack of tyres is designed to make the price pill easier to swallow (12% up on average since the summer of 2010), but this is probably going a little too far. The increase in price is above all due to the explosion in rubber prices (raw materials have become the preferred ploy of speculators since the sub-prime affair…). These prices have tripled since the beginning of 2009. Following the plummeting of stock markets which was caused by the Japanese catastrophe and by the uncertain situation in North Africa, they have just as rapidly recovered again. So we may expect another hike in tyre prices (12% on average is being rumoured) by the end of 2011.
For transport companies, the consequences will be substantial, but not to the point of having to side-line vehicles due to a lack of tyres. No specialist is going as far as that for the moment. But it is quite probable, by contrast, that choice will become more limited and that tyres of different brands will have to be used on one road unit. It is a sign of the times that the manufacturers are asking the distributors for volume commitments for the end of 2011 and for 2012 before delivering… the distributors are therefore logically going to ask the same of their clients.
For those fleets with the means to do so, the time to buy is therefore now… at the risk of feeding further imbalance into the market. But the current situation also represents a unique opportunity for the imposition of more re-treading. The reasoning is simple: if the industry cannot supply enough new bodies, increase the life of the existing bodies. Which will doubtless increase the value of existing bodies too… provided fleet managers pay them the attention they deserve. So fleets have part of the solution to the lack of new tyres in their own hands.
| 12/04/2011 | Claude Yvens