The “Ever Given” logjam highlights tyre price increase pressures

As the April edition of Tyres & Accessories went to press, the story of the Ever Given – the 400-metre long container ship that got wedged in the Suez canal – was getting a surprising amount of news coverage. The spectacle of a ship the length of four football pitches was enough to capture the attention of many. For others, the anecdotes of tenacious tug pilots and plucky digger drivers trying to free the gargantuan vessel from its unscheduled moorings did the trick. But for those in the tyre trade – and hundreds of other lines of work connected with global logistics – there were solid business reasons for their interest. “How many boxes have you got on the Ever Given?”, one tyre wholesaler asked. “It’s times like this…”, the other comically replied leaving the rest of his reply to the imagination.

However, while lots of us have heard the general story, there are more tyre-specific as well as Europe- and UK-orientated angles to it as well. What fewer people outside of the import/export side of things will have noticed is that the Ever Given is due to stop in both Rotterdam and Felixstowe. This means those customers in mainland Europe as well as the UK expecting deliveries of tyres that are aboard Ever Given simply won’t get them. According to the latest reports, the Ever Given is – somewhat humourously – expected “a little late”. But a delivery arriving over a week late and still in two weeks’ time is no joke for those waiting for products because a tyre in the bay is worth two on the Ever Given, as the saying doesn’t normally go.

Considering the wider context of Brexit and the Covid-19 pandemic, the Ever Given saga highlights how quickly supply and demand can be affected. And when you add in raw material cost pressure, it is further evidence that tyre prices will go up in the weeks and months ahead.

Of course, some tyre manufacturers have already increased their prices in the first quarter of 2021, but that doesn’t rule out further prices increases. The clearest examples come from Chinese tyre makers who are articulating details of sweeping cost increases. To give a specific example, Giti – which is the 11^th largest tyre manufacturer in the world according to our 2020 table – reports that its natural and synthetic rubber costs have gone up 44 per cent and 45 per cent in recent months. Giti’s cord prices are up 29 per cent and 37 per cent for steel and nylon cord respectively. And carbon black is said to be up a huge 78 per cent. Of course, if Giti is experiencing these increased input costs other manufacturers are too. Indeed, Tyres & Accessories learnt of Giti’s particular price pressure from a third Chinese tyre maker that was using them as the means of justifying its own price increases.

In the meantime, there are no corresponding signs of decreased demand and especially not in the UK where social distancing rules are at the earliest stages of relaxing now that the that full “stay at home” order is beginning to be relaxed. Those in the tyre retail business are hopeful that this will result in increased miles driven figures and therefore, greater tyre demand. But the combined factors of supply trouble, increasing input costs and growing demand naturally result in pressure to increase prices.

This will be welcome news in high value sectors such as SUV tyres, which have historically been profit centres for business wanting to sell premium products are corresponding prices. The latest data appears to suggest that such products saw their market volumes and values reduce during the events of the last year. And therefore, upwards movements could provide the opportunities to restore such business benefits. In any case, market demand for such vehicles continues to increase so anyone with an eye on future replacement tyre sales will want to stay in the know about which tyres are which and who distributes them. That’s why this month’s magazine features in-depth coverage of SUV tyres of the latest market data (see page 22 of the April edition) as well as the leading products (see page 24 onwards).