Tyre prices here expected to inflate

SINGAPORE - Motorists should brace themselves for higher tyre prices as global demand for rubber bounces up and manufacturers face the biggest shortage in four years. Tyre manufacturers in Japan and China have told dealers here to expect price increases come December, according to Singapore Motor Tyre Dealers Association chairman Lim Gek Choon.

Since January, manufacturers have rolled out at least two price increases of between 5 and 7 per cent, dealers say. This has translated to higher retail prices. For example, a mid-range 15-inch Yokohama tyre that cost $120 eight months ago will cost $130 when the latest increase kicks in next month.

Two weeks ago, Goodyear announced it would charge more for its tyres in the United States, while last month Bridgestone raised European prices for the second time this year.

Prices are expected to climb as China's growth and the recovery in Europe and the US drive the global surge in rubber demand, while a poor harvest this year has led to diminishing stockpiles.

Futures may climb as much as 14 per cent to US$4 ($5.30)a kilogramme by March on the Singapore Commodity Exchange, according to the median estimate of nine brokers and analysts surveyed by Bloomberg.

Mr Ler Hwee Tiong, who runs sales portal Tyrepac.com and has been in the business for 15 years, said retailers would "try to absorb" any price increases. "But this cannot be prolonged because of various factors such as cost of running a business. Usually, down the road, say, in one to two months, we will have to push the cost to consumers. It is inevitable," he told MediaCorp.

Currency movement may help to cushion any increases. For example, the weak US dollar has helped Stamford Tyres "compensate" for warehouse costs despite two rounds of price increases, said company president Wee Kok Wah. "As a result, based on the retail price in Singapore dollars, we have not done much in terms of price increase," he added.

The company, which implemented a 5-per-cent price increase in May, will assess the situation after January. But Mr Wee expects tyre prices for passenger cars, light trucks and sports utilities vehicles to be maintained. "I don't think there is a shortage of tyres but there is a shortage of rubber," he added.

With natural rubber making up half the cost of a tyre, industry players expect the quantum of price increases to be small, similar to those seen this year. "They (manufacturers) don't do double-digit increases because it would be hard to swallow for everyone down the line," said Mr Ler.

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