Concern Over Tire Prices, Supply

This Editorial appears in the Feb. 7 print edition of Transport Topics. Click here to subscribe today.

There were more signs of the trucking industry’s resurgence last week, as a number of publicly-held fleets reported improved earnings, while analysts said trailer and used trucks sales surged during 2010.

So it came as a cold shower when we found that tire manufacturers were sharply raising prices, in large part because of fast-rising costs for their components.

Even more worrisome than the higher truck prices, however, were the signs that tire supplies may not be adequate to meet rising demand as truck and trailer sales grow this year and overall freight demand increases.

Tire makers wisely reduced their manufacturing capacity as demand plummeted during the recession, as did all truck makers and their suppliers.

However, it appears that the tire industry may have been a little slower to recognize the recovery that was quietly underway in the truck-supply industry last year than were vehicle and trailer makers.

In the words of one tire company official: “2010 caught everyone by surprise.” While most analysts had predicted growth in the low single digits, the official said, growth actually “ended in the high teens.”

Indeed, trailer shipments last year actually grew 52% over 2009 levels, while new Class 8 truck sales during 2010 ended up 13% above the previous year.

And orders for both trucks and trailers grew even faster; for instance, trailer orders during 2010 more than doubled, reaching 166,500.

The tire price increases come as fuel prices continue their upward climb.

The average retail price of a gallon of diesel has risen for nine straight weeks, as crude prices have crossed $90 a barrel.

The rising cost of petroleum, incidentally, is one of the causes tire manufacturers pointed to when they explained the need for their price increases.

A truck-stop official said he was more concerned about supply than he was about higher prices. “The bigger question is, ‘Can I get inventory?’ ” This official said one of his suppliers had warned there might be shortages later in 2011.

As painful as these concerns may be, however, it is almost welcome relief after the economic doldrums of the past few years to be worrying about shortages resulting from unanticipated high demand.

But we need to be sure that the supply industry is ready to meet the improved business levels that most of us expect during 2011.