Rubber hits the road to higher prices

10/15/2010
BY LARRY P. VELLEQUETTE
BLADE BUSINESS WRITER

Now is not the time to blow a tire.

The worldwide price of rubber is at its highest level in decades as demand from China and India outstrips existing supply, leading tire companies such as Findlay-based Cooper Tire and Rubber Co. to raise their prices.

Cooper Tire announced last month that it would pass along a price increase of as much as 6.5 percent, beginning Nov. 1, citing rising raw materials costs. The increase is the second time in five months Cooper has raised its tire prices, passing along a 7.5 percent price hike on June 1 for the same reason.

And it's by no means alone. Virtually all manufacturers of light truck and car tires being sold in the United States have dramatically increased their prices this year in response to the skyrocketing price of tires' main ingredient: rubber.

The price of rubber hit a record $3.94 per kilogram this week on its main trading market in Malaysia - 250 percent higher than in December, 2008.

Analysts say strong demand from China, which surpassed the United States this year as the world's largest automotive market, is behind much of the increase.

About 75 percent of the world's natural rubber supply comes from four countries: Malaysia, Indonesia, Thailand, and Vietnam.

But those buying tires have little interest in hearing why China's newfound love affair with the automobile might cost them an extra $200 or more when they need new tires, said Bob Amonette, owner of Bob's Tire and Auto, 1618 Monroe St.

"People are phone shopping, looking for the cheapest tires, or they just hang up on me," when he gives them the price, Mr. Amonette said. "I hit 36 years selling tires this year, and if you had told me 10 years ago that people would be paying $800 or $900 for a set of tires, I would have said you were crazy."

And it's not just the cost of rubber that's driving up prices, Mr. Amonette said. Auto manufacturers are using lower-profile performance tires on their vehicles that, because of the physics involved, wear out almost twice as fast as the 50,000 to 60,000-mile tires common just a few years ago.

Mr. Amonette said a customer who, two years ago, might have spent $600 for a set of four tires now finds they're paying half-again as much for new rubber.

Contact Larry P. Vellequette at:

lvellequette@theblade.com

or 419-724-6091.