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Tire price hikes

Korea’s major tire makers to raise prices as rubber supply tightens

Price hikes likely to boost tire makers’ profitability and lead to increased vehicle prices

By May 31, 2021 (Gmt+09:00)

Hankook Tire
Hankook Tire

South Korea’s three leading tire makers are set to raise prices of commercial and passenger vehicle tires on growing demand from automakers and spiraling costs of raw materials, including natural rubber.

According to the tire industry on May 30, Hankook Tire & Technology Co. and Kumho Tire Co. plan to raise the price of replacement tires sold in Germany by 3-5% in July.

The price hikes by Hankook and Kumho, Korea’s two largest tire manufacturers, follow similar moves earlier this year, when they raised tire prices in Korea and the US by a single digit.

Nexen Tire Corp., Korea’s third-largest tire maker, already raised prices in Korea, the US and Europe by 3-8% in the past couple of months.

The three Korean companies could raise tire prices again in the near future, depending on “market dynamics,” said industry officials.

Other global tire manufacturers have been hiking tire prices since early this year.

French tire maker Michelin, which increased truck tire prices sold in the US and Canada in March, said in mid-May it is raising on- and off-road commercial tire prices up to 13% in July.

American tire manufacturer Goodyear Tire & Rubber Co. and Japanese company Bridgestone Corp. raised their tire prices by up to 14% in the past couple of months.

Germany’s Continental Tire and India’s Apollo Tyres followed suit.

Kumho Tire
Kumho Tire

RUBBER PRICES AT MULTI-YEAR HIGHS

Analysts said the steep rise in rubber prices is compelling tire makers to increase prices even as they expect a rebound in demand amid signs of improving global economic conditions.

Natural rubber prices have been rising from the end of 2020 owing to tight supply and rising demand.

Industry watchers say rubber prices are trading at multi-year highs as protective glove demand surged due to the COVID-19 crisis and industry use rebounded in China while supplies remain tight with producers struggling to replenish stock.

Tokyo rubber futures on Japan’s Osaka Exchange finished at 260 yen per kilogram on May 26, up 90% from 137 yen in May 2020.

Global rubber prices are widely expected to rise over the next several years due to flooding in rubber-producing countries, rubber-tree leaf disease and China needing to replenish its rubber reserves.

IMPROVING PROFITABILITY AT TIRE MAKERS

According to the Korea Tire Manufacturers Association (KOTMA), the three domestic tire players’ combined production volume rose 14.5% in the first four months of this year from the same period a year earlier.

While sales of retirement tires and those for exports increased 10% and 17.5%, respectively, in the January-April period, shipments for new cars declined 5.9%, according to the association.

Nexen Tire
Nexen Tire

In the domestic market, retirement tires account for about 70% of all tire sales and the remaining 30% are taken up by new-vehicles tires.

With the increased sales of 18-inch and above sized tires for sport utility vehicles and trucks, the Korean tire companies are expected to gain higher profit margins, analysts said.

The tire price hikes, coupled with increasing prices of other raw materials for vehicles such as steel and automotive chips, could lead to an increase in new vehicle prices in coming months, they said.

Write to Hyung-Kyu Kim at khk@hankyung.com

In-Soo Nam edited this article.

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