Replacement shipments lead tire sector rebound

Going back to 2020, numbers in the tire industry were so poor that this year almost had to be an improvement.

After all, when the coronavirus pandemic first broke out in early 2020, tire factories worldwide closed temporarily, some for months. That led to an 8.2 percent drop in tire-related revenue for the Top 75 tire makers. Among the top 25 firms worldwide, tire sales fell at 20 of the 25 firms, with a dozen of the producers posting double-digit declines.

But 2021 has been much nicer to the tire industry, particularly on the replacement side, as the public resumed driving at more traditional levels and, therefore, began buying tires again.

In its latest forecast released Dec. 2, the U.S. Tire Manufacturers Association projected overall U.S. tire shipments will climb 10.8 percent to 336 million units, nearly 33 million units above 2020 and 1 percent higher than the 332.7 million units shipped in 2019.

During the year, the USTMA forecast for aftermarket tires rose each time the association updated, from March to August, and then again in December. The group now projects passenger replacements to climb 10.9 percent, light truck tires to grow 16.8 percent and truck/bus tires to jump 18.1 percent.

The picture for original equipment tire shipments, while still above 2020, isn't quite as bright. The USTMA downgraded its projections for OE in its latest update, as automotive production dropped in response to the shortage of computer chips. USTMA now expects totals to fall below those of 2019, with passenger OE shipments inching up 1 percent in 2021 from 2020. The light truck tire OE sector is projected to gain 4.6 percent for the year, with truck/bus up a stronger 23.3 percent.

Gains in the market also showed up on the bottom line for many of the tire manufacturers, at least through the year's third quarter. Bridgestone, Goodyear, Pirelli & C. S.p.A., Sumitomo Rubber Industries Ltd. (SRI) and Yokohama Rubber Co. Ltd. reported strong results for both sales and operating profit during the period. Michelin also reported higher sales but didn't disclose earnings.

However, Continental A.G. and Toyo Tire Corp. suffered drops in operating income despite experiencing higher sales for the period.

Tire manufacturers also weren't shy in planned capital spending for the coming years. In the 12-month period ending in August 2021, tire makers worldwide committed nearly $7 billion toward new factories and capacity expansions, more than three-fourths of which is earmarked for projects throughout Asia.

The total is roughly $2 billion more than the amount tracked by Rubber News during the August 2019-August 2020 period and includes investments for three greenfield tire factories. The projects represent 53.5 million new units for passenger tires and 6.5 million truck/bus tires, as well as more than 100,000 metric tons of new capacity for farm, industrial and OTR tires.

At the same time, tire makers closed or prepared to close four factories, representing just over 19 million units in annual capacity.

Rising raw material costs, coupled with higher shipping expenses and "changing market conditions," caused some degree of volatility during 2021. All major tire manufacturers have increased prices multiple times—some as many as five times during the year—and a handful already have planned price hikes that will be enacted in early 2022.

Despite increased tariffs, imports of tires into the U.S. through the first three quarters of 2021 still are on track to top the record number of tires imported into the U.S. in 2019. That is the case even though imports slowed noticeably during this year's third quarter as supply-chain issues continued to play a factor in moving goods around the world.

While imports are up overall across all categories, the effects of the U.S.' decision earlier this year to impose elevated import duties on passenger and light truck tires from South Korea, Taiwan and Thailand are readily apparent in the data.

Passenger tire shipments from Taiwan—whose tire makers, in particular, were hit the hardest by the duties—plunged 66.4 percent in the third quarter and 46 percent during the January-September period. On the light truck side, shipments from Taiwan fell 55.2 percent in the first nine months of 2021, dropping Taiwan out of the top 10 sources of such products.

Overall, passenger tire imports were up 16.5 percent through September to 115.5 million units. In the light truck tire category, imports of 25.3 million for the nine-month period were 32.8 percent ahead of 2020 and nearly 28 percent ahead of 2019.

In the medium truck/bus tire category, imports climbed 41.4 percent to nearly 13 million units. Thailand continues to strengthen its status as the No. 1 importer in this sector, boosting shipments to the U.S. by 63.3 percent in the quarter and 58.8 percent for the year-to-date. Thailand's exports to the U.S. through the year's first nine months of 5.22 million units represent more than 40 percent of overall imports, up from 36 percent a year ago.