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Overproduction of truck and bus tires in China and other countries has put the U.S. tire market in flux, especially the retread market, according to Aaron Murphy, vice president of commercial tire sales for TBC Corp. “Retreads became less competitive against new tires as manufacturers reduced new tire pricing,” said Mr. Murphy, a former vice president of China Manufacturers Alliance L.L.C., who has made nearly 60 trips to China for sourcing and product development.

In 2002, there were approximately 20 truck and bus tire factories in China, producing about 10 percent of world supply, he said at the recent International Tire Exhibition & Conference (ITEC) in Akron.

By 2015, China had more than 120 truck and bus tire factories — some with multiple brands — and boasted 14 of the top 40 tire manufacturers in the world, he added.“Fueled by economic policies and a downturn in domestic demand, (Chinese) factories exported more and more,” Mr. Murphy said.

He added that sharp decreases in the price of natural rubber, oil, steel and carbon black combined with burgeoning supply to cause the price of truck tires to drop.

Chinese truck and bus tires became more competitive against other brands, he said, especially during the production shortages of 2010-2012. The cost per mile for higher-technology tires improved, and Cost Plus marketing also played a role.By 2013, tire makers around the world were cutting prices because of lower material costs. The market sector that suffered the most from this was retreads in the 2013-2016 period, Mr. Murphy noted, with an LP22.5 retread and an LP22.5 new truck tire both costing about $175.

“As low-cost TBR (truck and bus radial) products began to sell below retreaded products, adjustments were made to retread rubber to overcome price discrepancies, right?” Mr. Murphy asked rhetorically. “Incorrect. With the limited number of retread companies — the Big Three hold a market share of approximately 80 percent — they held pricing steady.”

In reaction to this, retread companies started offering lower-technology retread rubber at about 20 percent less than standard rubber, mostly for non-national fleet customers, Mr. Murphy said.Tire Business photo by Miles MooreAaron Murphy, vice president, commercial tire sales, TBC Corp.“New tire prices were reduced by a much greater percentage,” he said.

Dealers feeling the effects of a softer retread market embraced Opening Price Point (OPP) new tires, he noted. The 2008-2010 downturn and 2010-2012 shortage also pushed fleets toward OPP new tires. Meanwhile, small fleets started buying OPP new tires to save money, and larger fleets bought them at trade-in or in trailer positions, he said.

Yet dealers still struggled with profitability because tire manufacturers controlled national fleet delivery commissions, according to Mr. Murphy.“All (these factors) created a market for inexpensive TBR products,” he said. “The more it (the TBR market) grew, the more it became a focal point.”

With the coming of new duties in 2016, market disruption is here and will continue, he said, adding that the Chinese government continues to pay subsidies to even the most inefficient tire facilities — largely because it doesn’t want to lay off workers.

“I know of one plant that had 3,500 employees and produced 2,000 tires a day when it should have been producing 20,000,” he said. “But the government doesn’t want to close it.

“We have a trade war going on, whether we like it or not,” Mr. Murphy continued. “Will it drive any OPP tire production to the U.S.? Recent history says no high-technology tires are produced here, but entry-level production seems to be moving offshore.”