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Why Are Tires Getting More Expensive?

Written by: Colleen Frye

We’ve all gotten the updates! Large tire manufacturers across the globe have announced in 2017 that they will be increasing their tire prices over the next month or so.

Goodyear Tires was the first major manufacturer to announce their price increases. They alerted the tire industry that they will be increasing their prices by as much as 8%. Others followed suit, including Cooper Tire, Hankook, Pirelli & even Carlisle – who has said to increase their rates by almost 12%. The latest company to announce an increase is Nexen Tire which said their increase will be 5% starting March 1st.

A dealer of ours said, ‘when one sneezes, the rest catch a cold’….. He couldn’t have been more right!

So what’s the deal with all these manufacturers increasing their tire prices? The Association of Natural Rubber Producing Countries announced that the price of natural rubber will continue to increase in 2017. Reasons for this include, shortage of natural rubber due to weather issues as well as an increase in the price of synthetic rubber & the increased demand.  One weather concern that caused major issues with pricing were the recent floods in Thailand that hampered the growth of rubber trees.

Another factor is the growth of the global economy. It is said to increase by over 3.6% in 2017. While that is good, it does effect the pricing of many products used throughout the world.

And finally, synthetic rubber prices have continued to increase. ‘Crude oil prices had improved from end of September 2016 in response to the initiative by the OPEC to curtail oil output and the consequent agreement it reached on November 30 to cut output by 1.2 million barrels per day (bpd). As non-OPEC producing countries led by Russia also joined the move, oil prices rose by 23.6% from US$ 44.50 per barrel at end of September by to US$ 55.0 per barrel at end of December. Synthetic rubbers being petroleum-derived products, the rise in oil prices led to speculation of a possible substitution of synthetic rubbers by natural rubber’. Because of this, many users of synthetic rubber will see natural rubber as a more viable alternative, driving an even higher demand.

So without sounding too much like a Debbie downer, this is something we will need to watch! As always, we will continue to update you as we learn more.

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