China's overproduction of truck, bus tires hampering US retreads market

Akron, Ohio –Overproduction of truck and bus tires in China and other countries has put the US tire market in flux, especially the retread market, according to Aaron Murphy, vice president of commercial tire sales for TBC Corp.

“Retreads became less competitive against new tires as manufacturers reduced new tire pricing,” said Murphy, a former vice president of China Manufacturers Alliance LLC, who has made nearly 60 trips to China for sourcing and product development.

In 2002, there were approximately 20 truck and bus tire factories in China, producing about 10 percent of world supply, he said at the recent International Tire Exhibition & Conference (ITEC) in Akron.

By 2015, China had more than 120 truck and bus tire factories — some with multiple brands — and boasted 14 of the top 40 tire manufacturers in the world, he added.

“Fueled by economic policies and a downturn in domestic demand, (Chinese) factories exported more and more,” Murphy said.

He added that sharp decreases in the price of natural rubber, oil, steel and carbon black combined with burgeoning supply to cause the price of truck tires to drop.

Chinese truck and bus tires became more competitive against other brands, he said, especially during the production shortages of 2010-2012. The cost per mile for higher-technology tires improved, and Cost Plus marketing also played a role.

By 2013, tire makers around the world were cutting prices because of lower material costs. The market sector that suffered the most from this was retreads in the 2013-2016 period, Murphy noted, with an LP22.5 retread and an LP22.5 new truck tire both costing about $175 (€155).

“As low-cost TBR (truck and bus radial) products began to sell below retreaded products, adjustments were made to retread rubber to overcome price discrepancies, right?” Murphy asked rhetorically. “Incorrect. With the limited number of retread companies — the Big Three hold a market share of approximately 80 percent — they held pricing steady.”

In reaction to this, retread companies started offering lower-technology retread rubber at about 20 percent less than standard rubber, mostly for non-national fleet customers,  Murphy said.

Dealers feeling the effects of a softer retread market embraced Opening Price Point (OPP) new tires, he noted. The 2008-2010 downturn and 2010-2012 shortage also pushed fleets toward OPP new tires.

Meanwhile, small fleets started buying OPP new tires to save money, and larger fleets bought them at trade-in or in trailer positions, he said.