China's insatiable demand for commodities has prompted a tripling in the price of mining truck tires, making them more expensive than a Porsche 911 Carrera S type or a condominium in Miami.

Prices for tires about 3.5 meters (11 feet) across, used on the Caterpillar Inc. trucks that haul iron ore and coal, have touched $100,000 on the spot market, according to Leighton Holdings Ltd. (LEI), a contractor for mining companies including BHP Billiton Ltd. (BHP) and Anglo American Ltd. Prices rose as high as $150,000 in 2008.

That compares with contract prices of about $30,000, according to Roesler Tyre Innovators GmbH, which retreads so- called off-the-road tires. Demand from China, the world's biggest metals buyer, drove copper, iron ore, gold and coal to records this year, forcing companies to compete for the equipment and labor needed to mine them.

"We fear the situation will become as tight as in 2007," Paul Roesler, managing partner of Dortmund-based Tyre Innovators, said by phone from the company's Perth office, citing Michelin & Cie and Bridgestone Corp. as major suppliers. "We see tight tire supply and high prices become a challenge for mining companies again but we think that the large players have prepared for this and have better contracts with suppliers and have improved stock."

David Fuller's view Eoin last reviewed rubber prices and the outlook for tire companies on Wednesday 19th January 2011 and that analysis is now in Fullermoney's public archive.


At the time, rubber prices were soaring higher in a climactic fashion. They became even more overextended as you can see from this Japanese-traded contract, Rubber TCM (JN1) before reaching peaks of at least medium-term significance confirmed by large downward dynamics in late February. Today, JN1 is back in a region of potential support which should at least cushion downward risk but a sustained push back above ¥400 would be required to indicate a renewed period of demand dominance.

What about tire companies which should theoretically benefit from this recent respite in soaring prices for rubber, not to mention the demand for tires?

Germany's Continental AG has been a steady performer, shows good relative strength and is not overstretched relative to its rising 200-day moving average. A close beneath €66 would now be the minimum required to question current scope for additional gains.

The USA's Cooper Tire & Rubber tested its 2007 peak in April before falling back sharply in the general market correction. Today, it looks at least temporarily oversold but given the technical damage recently, this pattern will require more support building before it can support more than a technical rally.

The USA's Goodyear Tire & Rubber encountered resistance from the 2009 highs but has steadied once again following a correction. A close beneath $14.50 would now be required to delay significantly a further and ultimately successful test of lateral resistance near $19.

The USA's Nexen has underperformed relative to other tire companies shown but a large weekly key reversal is forming, reaffirming support near the bottom of the range. A close beneath $19.50 would now be required to offset current scope for sideways to somewhat higher ranging.

The USA's Titan International formed a large (Type-3, as taught at The Chart Seminar) base below $10, then a multi-month first step above the base (a combination that often supports strong moves) before moving steadily higher to become overstretched relative to the MA and eventually accelerate to a peak in early May. It has now found support from the MA and a close beneath $20 would be required to question current scope for sideways to higher ranging.

Korea's Hankook Tire has been a very strong performer. It is currently retesting its highs but is also clearly overextended relative to its medium-term uptrend approximated by the rising 200-day moving average. Consequently some additional mean reversion is likely over the medium term but the bull trend will remain intact so long as the progression of higher reaction lows is maintained.