February 27, 2024

2024: The Year of Correction in the Commercial Tire Market

After experiencing a decade of growth, the commercial tire market now confronts an array of challenges, ranging from disruptions in the supply chain to fluctuations in the costs of raw materials. Some experts are labeling 2024 as a “correction year,” a sentiment echoed by Brian Sheehey, senior vice president at Ralson Tire North America. Sheehey anticipates that demand for commercial truck tires will either remain static or see modest growth in 2024, following a turbulent period in 2022/23 marked by oversupply and reduced pricing. 2024: The Year of Correction in the Commercial Tire Market

The oversupply issue was exacerbated as dealers extended their supply chain orders to alleviate the backlog, only to face a sudden drop in demand. This surplus of tires flooded the market towards the end of the previous year and the beginning of the current one.

While Europe experienced the initial downturn in the commercial tire segment in early 2021 and 2022, signs of recovery are emerging. Sheehey foresees a similar rebound in the U.S. market as manufacturers rebalance their product distribution globally rather than concentrating solely on North America. This correction, he explains, will entail adjustments in manufacturing, supply chain management, and inventory levels by dealers to address the overstock situation prevalent in the first half of 2023.

Certain segments, such as construction and trailer tires, may see a slight uptick in demand, attributed in part to economic stimulus funding construction projects and the necessity to replace aging trailer casings.

Additionally, the transition towards regional trucking, with smaller businesses shifting from long-haul to shorter regional routes, is poised to bolster demand. Sheehey underscores the resilience of local economies and the opportunities they present for surviving small businesses to flourish in regional markets.

However, Sheehey cautions that rising raw material prices, increased interest rates, and global conflicts pose significant challenges for fleets in 2024. Escalating prices of key commodities like oil, essential for producing tire components such as carbon black and natural rubber, contribute to manufacturing cost increases.

Inflationary pressures and global tensions are driving price hikes, compounded by the Federal Reserve’s decision to raise interest rates, leading to higher borrowing costs for fleets investing in new equipment and replacement tires.

Sheehey suggests that the surge in raw material costs could be linked to conflicts worldwide, further exacerbated by logistical challenges in transporting these materials to various regions.

In light of these challenges, Sheehey predicts that commercial truck tire prices will likely rise in 2024 after experiencing declines in late 2022 and 2023, driven by excess industry capacity and inventory levels rather than material costs or supply and demand dynamics.

For commercial tire dealers, Sheehey advises a focus on maximizing the value extracted from every dollar spent, emphasizing collaboration between dealers and fleets to identify cost-effective options while ensuring supply availability. 2024: The Year of Correction in the Commercial Tire Market

To support North American dealers in maintaining consistent supply, Ralson plans to open a new warehouse in the US, expand factory capacity, and enhance its sales force. The company aims to provide a comprehensive range of products tailored to various market segments, including regional, pickup and delivery, and waste haul/construction applications.

In conclusion, Sheehey emphasizes the importance of forging strong partnerships in navigating market uncertainties, enabling dealers to capitalize on opportunities and maximize profits by leveraging manufacturer and supplier relationships and embracing innovative solutions.