GRI Emphasizes Consequences of Geopolitical Crises on Tire-Supply Costs

In the midst of ongoing geopolitical conflicts in the Middle East and Red Sea regions, Asian tire manufacturers are grappling with a significant surge in shipping costs, as highlighted by Prabhash Subasinghe, the founder and Managing Director of GRI. The repercussions of these geopolitical crises are notably affecting vessel availability and escalating transportation expenses, particularly concerning exports destined for Europe, according to Subasinghe, who leads the Sri Lankan off-road tire manufacturing company.

Subasinghe underscored the "huge impact" that these geopolitical crises have had on the shipping industry, specifically in terms of vessel availability and transport costs. He emphasized that the cost increases have been substantial, with shipping expenses doubling since the commencement of the Middle East conflict in October of the preceding year. During an interview with ERJ on February 8, Subasinghe revealed that the entire industry has generally adopted a surcharge ranging from €1200 to €2000 to cope with the heightened shipping costs.

As a direct consequence of these soaring transportation expenses, tire manufacturers are now confronted with the necessity to recalibrate their final product prices based on the specific tire types. Subasinghe articulated that, for pneumatic tires, an approximate increase of at least 5% is anticipated, while for industrial tires, the escalation is expected to fall between 2% and 3%.

Expressing concern about the ongoing Red Sea crisis, Subasinghe cautioned that if a resolution is not promptly reached, the situation is likely to exert further pressure on tire prices. Drawing parallels to the challenges encountered in 2021 and extending into 2022, Subasinghe recounted the difficulties faced when containers shipped from Asia were detained in Europe and the United States, causing disruptions and delays in their return.

The broader economic implications of these challenges are not lost on Subasinghe, who warned that the global economy is ill-prepared to endure another wave of inflation triggered by escalating costs in the shipping industry. The uncertainties surrounding geopolitical conflicts, coupled with the logistical disruptions in the shipping sector, pose a multifaceted challenge for businesses across industries, including tire manufacturing.

It is evident that the tire industry, like many others, is navigating a complex landscape shaped by external geopolitical factors and disruptions in the global supply chain. The surging shipping costs, coupled with the unpredictability associated with geopolitical conflicts, are contributing to an environment of uncertainty and necessitate adaptability on the part of tire manufacturers. As the industry grapples with these challenges, stakeholders will need to monitor developments closely and strategize effectively to mitigate the impact on production costs and ultimately on end-consumer prices.