NR supply is European tire industry's ‘most acute vulnerability'

Brussels – Europe's tire industry remains significantly more exposed to imported raw materials than the wider EU economy, with natural rubber (NR) representing its “most acute import dependency,” according to a recent Oxford Economics report.

The study commissioned by Tyres Europe estimated that imported intermediate inputs accounted for 11.9% of EU tire production value in 2023, compared with an economy-wide average of 7.0%.

“The EU tire manufacturing industry has a higher relative reliance on supply chain imports than the whole economy,” the report stated 28 Sept.

NR represented the most significant exposure, as climatic conditions prevent commercial cultivation in Europe and leave EU tire makers entirely dependent on imports.

According to the report, Thailand and Indonesia supplied 29% and 28% of EU NR imports respectively, followed by Ivory Coast at 17%, Malaysia at 10% and Vietnam at 7%.

The geographic concentration, said the report, exposed tire production to “country-specific risks,” including extreme weather and plant disease.

Flooding in Thailand and Malaysia in 2024 contributed to lower production and, with limited ability to raise supply rapidly elsewhere, led to a 43% increase in global NR prices compared with 2023.

NR, the report said, combined “total import dependence, geographic concentration, climate risk, and increasing regulatory burden.”

To assess the potential economic impact of this vulnerability, Oxford Economics modelled a hypothetical major disruption to NR supplies, which could trigger a six-month tire shortage and reduce EU GDP by €250 billion over three years.

Drawing on “historical episodes,” the scenario assumed a 75% yield loss from disease affecting 10% of Southeast Asian tree stock combined with “a significant weather-driven output shock.”

This, it said, leads to “a projected 13% fall in global rubber supply and a 160% rise in global NR prices by 2028.”

Under the scenario, passenger tire prices would rise by around 30%, while commercial tire prices would increase by 50%, according to the report.

Based on the scenario, the model projected an “acute phase of physical tire shortage” lasting approximately six months, from the fourth quarter of 2027 through the first quarter of 2028.

This would reflect “the gradual accumulation of replacement demand across the EU vehicle fleet, limited inventory buffers in the supply chain, and the absence of short-run substitutes for NR,” the report said.

Furthermore, the shortage could temporarily take part of Europe's truck fleet out of operation and constrain automotive, agricultural and construction activity.

For heavy trucks, Oxford Economics estimated that roughly a third of the EU's 6 million-strong fleet requires new tires in any 12-month period.

Under its disruption scenario, the study projected that a third of those requirements could not initially be met because of tire scarcity.

Operators, however, could mitigate some of the impact through measures such as reducing speeds to extend tire life.

Beyond tire and vehicle manufacturing, the shortage would raise producer prices by around two percentage points above the baseline in early 2028, while the average EU resident would lose approximately €230 in real purchasing power, the study found.