Here we go again
Just when it seems like the reported economic recovery and relatively stable fuel prices would provide some much-needed relief for the trucking industry, most of the major tire and retread manufacturers have announced another round of price increases to offset the rising costs of raw materials and energy. Making matters worse is the political instability in Thailand (the world's leading natural rubber producer) and the fact that natural rubber inventories were significantly lower in 2009 as manufacturers attempted to scale back spending.
Unfortunately, the bad news doesn't end there. Winter means the flow of latex from rubber trees is dampened (which limits production), while the demand for products like rubber gloves has remained strong despite the global economic slowdown. It's also important to note that output from the Association of Natural Rubber Producing Countries (ANRPC) fell 5.1% in the 12-month period ending October 2009. Since ANRPC accounts for about 93% of the world's natural rubber production and the association has expressed concerns about how climate change will affect future production, the long-term prognosis appears to be troubling at best.
On the other hand, ANRPC also reported that rubber-tree plantings have risen with one million new hectares added between 2005 and 2008. The goal is to regulate natural rubber production in order to stabilize prices by 2014. If you're wondering why it will take so long for the new plantings to have an effect, it takes six to seven years for a rubber tree to reach maturity and then it will remain productive for another 25 years. In other words, natural rubber production is a slow process that is totally dependent on factors like temperature and rainfall. But the fact remains that potential supply will increase by 30-50% between 2015 and 2020.
Between now and then, fleets must be prepared for future price increases as unstable natural rubber production and crude oil costs will continue to have a negative effect on the tire manufacturing and retread industries. This puts increased emphasis on inflation pressure maintenance practices and tire repair procedures since inattention in these areas will reduce tire performance and severely limit retreadability. Another area that must be addressed is the seemingly simple task of seating the beads. Believe it or not, improperly seated beads will result in irregular treadwear patterns and premature removal from service.
This also means fleets will need to be more selective on who services, repairs and retreads their tires. A poorly trained and ill-equipped workforce makes it easy for vendors to offer rock-bottom labor prices, but the consequences can be severe on a number of levels. Besides the obviously higher cost per mile, improper service procedures can also expose fleets to increased liability. The owner of the vehicle is ultimately responsible for the maintenance and repair of every component, so utilizing the services of a vendor that does not employ a qualified workforce will never look good in front of a jury.
As expensive as they are today, truck tires will likely become more expensive with each passing year. Even with increased natural rubber production on the horizon, crude oil and energy costs will still have an impact on prices because both are expected to rise over the next decade. Getting a handle on maintenance and service procedures in the short term is the only way that fleets can establish practices that will lessen the blow from future increases.
