Emilio Gomez, B2B Tyres Chief Executive Officer, Panama, 1 December 2018
Tires demand remains strong
According to Freedonia, world demand for tires is projected to rise 4.1 percent to 3.0 billion units in 2019. In value terms, sales of tires are forecast to advance 7.0 percent to $258 billion. Michelin also anticipates similar numbers, with long-term demand to rise at the rate of 5 to 10% a year in developing markets and 1 to 2% a year in mature markets.
Demand will be led by developing countries. Higher income levels, GDP growth and investment in infrastructure, which would raise millage, and then replacement rates will be in the origin of strong demand.
Automotive market swift demand for tires
This trend of higher income, particularly in middle class developing countries, will favour light vehicles sales. Those sales will compensate millennial tendency to other approach to car ownership in developed countries. The automobile market is expected to strengthen due to growing urbanisation and rising personal disposable incomes. Demand for tires in this market will rise 3.3 percent per year to 2.0 billion units.
The Asia/Pacific region will lead tire demand
The Asia/Pacific region will continue to lead tire sales. China remains at the top, with more than half of the market share . The country is also still growing above average. India, Indonesia, and Thailand also offer increasing opportunities while Japan demand will be on decline.
The next most important markets, North America and Europe, will still grow slightly. Aging and slow growth population together with new trends towards the use of public transportation or working remotely post extreme challenges for increase in sales.
The developing Africa/Mideast region and Central and South America will post above average gains in tire sales. However, each of these regions will remain below six percent of the global total in 2019.
Price turbulence approaching
Regarding brands and manufactures, Bridgestone, Michelin and Goodyear together will continue to hold around 40%.
Price will remain turbulent. According to the Association of Natural Rubber Producing Countries, there has been a short fall in production at 786,000 tons during the first seven months of 2018. Unfavorable weather conditions and prevailing low rubber prices have resulted in a production fall in Malaysia, Vietnam, India and Sri Lanka so far this year. This, together with trading the tensions between the USA and China or increase in the inventories in warehouses such as in Singapore will affect the market price for the next 6 to 12 months.
Positive outlook, but uncertainty on the way
In summary, positive demand outlook, but uncertain price conditions that would affect margin; managing inventory and hedge currency as in 2018 would be again a key element for a successful year.