Since the beginning of 2017, tire price increases have followed one another, both for major manufacturers and limage1ow-end tires… I would even say that it’s worse for low-end tires … which makes retreading and repair more attractive and interesting! Moreover, I will share some interesting information with you … Generally, the price of rubber varies, among other things, with that of oil.

In a previous blog, I told you that low-end tires would be more affected than others by the increase in the price of rubber: http://lanotr.com/whats-going-on-with-the-price-of-tires/

Currently, we can see in the industry that major manufacturers have increase their prices since the beginning of January 2017, by an average of 5 to 8% for earthmover tires. For low-end tires, especially those made in China, this increase can reach up to 16%. That being said, these increases are not all visible in the market since some retailers still have products to sell. Moreover, for winter earthmover tires, the increase for popular dimensions will only be around 4 to 5% this fall, since the main retailers were able to order before the full price increase in January.

So, I always ask myself… how can we predict the evolution of rubber prices? Of course, it’s impossible, but without being an economist, we can easily conclude by comparing the indices that the price of natural rubber is linked to that of oil (see IndexMundi graph below on the 5-year trend).

 

 

In addition, based on an article by HinduBusinessLine, we can figure out that prices are linked together, which tends to show that the correlation is not perfect, but still strong. The article even adds that we might have thought that the price of natural rubber should have been independent of that of oil, but not … because the substitute product is synthetic rubber, which is oil-based. So, if the price of oil is low, the price of synthetic rubber will also be low and the demand for natural rubber will be less, which will cause prices to drop! But the opposite is also true … Once again, all these elements only allow us to observe trends, but who can predict oil prices will partially predict the trend of rubber prices!

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This article is partly based on the following article:

http://www.thehindubusinessline.com/economy/agri-business/crude-oil-is-the-real-villain-behind-the-rubber-price-fall/article9046483.ece

 

 

 

 

 

 

 

 

 

 

 

Daniel Marleau – PDG LanOTR