Magazine for the professional tire industry
Issue link: https://mtd.epubxp.com/i/449261
MTD January 2015 Industry analysis of the more volatile raw materials, including new sources of rubber and silica. As an example, many manufacturers and research groups are working to develop standard manufacturing processes to allow for the use of rubber extracted from plants, such as dandelions and guayule, and silica from rice husk ash. I am not sure if the more traditional sources of supply will ever be fully replaced. However, aggressive research and development investments will likely yield some promising advancements on this front in the coming years. MTD: How will low oil prices afect the industry? Mitchell: Lower oil prices will defnitely provide a tailwind to raw material prices, especially synthetic rubber, carbon black, silica, and select plasticizers, but, I expect manufacturers will only be able to hold on to a portion of these savings. Te bigger beneft should come from increased driving trends and the boost to consumers' discretionary budgets, both of which should spur demand for replacement tires. Keep in mind every one-cent drop in the price of gasoline leaves approximately $1 billion of income in the pockets of consumers. MTD: What's the forecast for tire wholesalers? Mitchell: The tire wholesaling segment of the market continues to consolidate. Tere is plenty of liquidity available for the large players to fnance the acquisitions, so as long as the buyers can locate willing sellers, the buying spree will continue for the foreseeable future. Needless to say, as the market becomes less fragmented, the smaller ones have a harder time competing efectively. MTD: What are your predictions for the Big Tree: Goodyear Tire and Rubber Co., Bridgestone Americas Inc. and Michelin North America Inc.? Mitchell: I do not expect any significant surprises from the Big Three in 2015. These organizations will likely continue to focus on increasing the share of revenue that comes from high value added tires, and managing the price/ mix-to-raw materials spread. This disciplined commitment to managing the businesses for profitability rather than market share gains has paid off handsomely in recent years, and I doubt any of the players will abandon their winning strategies in 2015. "Every one-cent drop in the price of gasoline leaves approximately $1 billion of income in the pockets of consumers." Quik-Link: 800-687-1557 ext. 11109 20