Declining rubber supplies will mean continued high tire prices.
The period between the writing of this column and the actual printing is right around 30 days, or enough time for a 50-cent swing in diesel prices or another 10% increase in tires. It's reached the point where addressing the topic of operating costs is incredibly depressing because the outlook is never good. Nevertheless, a series of events has inspired me to end the year with an honest look at the future cost of tires and retreads.
After experiencing record high prices for natural rubber just a few months ago, worldwide demand has decreased to the point where the world's three largest producers — Thailand, Indonesia and Malaysia — have agreed to cut production by felling older trees that encompass more than 400,000 acres combined. This is significant primarily because it takes five to six years for a rubber tree to reach the point where it can actually produce latex (rubber). In a further effort to boost prices, they have also agreed to reduce tapping to limit supply. It all adds up to a global rubber market that is forecasting prolonged diminishing demand and could be one natural disaster away from a crippling shortage.
In a tire manufacturing world where reasonable oil prices should be welcomed good news, the continuing decrease in supply for natural rubber will more than likely keep raw material costs elevated so any savings on one will be passed to the other. And as Americans are driving billions of miles less each month, some companies are already closing plants and scaling back production in response to the reduced demand for replacement tires. When combined with higher energy and fuel prices, it adds up to more increases.
The U.S. has elected a new president, and the stock market is as unstable as ever. While I have few, if any, ideas on how to fix the economy, I'm still certain that we are facing a prolonged global recession. But I am equally certain that there will still be hundreds of thousands of trucks on the road every day, and each one of them has tires worth thousands of dollars.
The technology exists for radio-frequency identification (RFID) to allow a fleet to electronically track every tire. Everything from the age of the casing to the number of retreads and repairs can be monitored with the tread depths electronically recorded. Tire pressure monitoring systems (TPMS) are available that warn drivers of an underinflated tire before it's destroyed or damaged, and the TPMS can be linked to a fleet's maintenance department. This allows the service provider to be contacted in advance or immediately dispatched for emergency roadside service. The amount of technology available makes it incredibly easy for a fleet to manage tire assets from cradle to grave.
But the additional costs never seem to add up for fleets, so most of this technology sits on the shelf. Almost everything is still monitored and recorded. Checking tread depths should be as easy as scanning a sidewall and entering the measurement. Checking air pressure should be as simple as driving through a gate reader or scanning a valve stem. The volatility of rubber and oil prices are not expected to change, so fleets should start utilizing technology to track and monitor tire performance on a daily basis. After all, if I've learned anything in 2008, a lot can change in a day.