Historically the source for low prices on custom wheels, steel wheels are having their own prices rise as raw materials costs fluctuate.
It's a scenario that may limit the market segment further against its rival aluminum.
Steve Kelley, vice president of sales and marketing for distributor American Racing Equipment Inc. (ARE), said raw steel prices have risen about 30 percent in the past 90 days, leading to a 15-percent hike on finished goods.
``The customers have taken it, they understand,'' he said of Rancho Dominguez, Calif.-based ARE's dealer customers. ``That's something you have to pass on; it's a raw material increase.''
The price volatility is primarily from a low supply of steel, caused both by fewer producing mills in the U.S. as well as much of the product going to China to support its fast-growing economy. Mr. Kelley expects the steel prices to come down eventually once supply inches back up toward demand.
``They've closed so many mills, especially in the U.S. over the past 20 years, they've got to fire up some new ones,'' he said.
But Dave Simas, operations officer at Northwest Tire Factory group in Portland, Ore., isn't so sure that's going to happen soon. A regular visitor to China, he said infrastructure growth there is phenomenal and can support the growing economy. ``They may claim they're communists, but it looks to me like they're capitalists,'' he joked.
Mr. Simas said Northwest Tire has had to raise prices 7-10 percent on steel wheels at its members' retail stores to compensate for the higher prices. Also, he said fill rates have suffered up to a 25-percent reduction due to the shortages. The dealership orders about 250 steel wheels a week.
Mr. Kelley at ARE said the company hasn't had major supply problems. ARE handles about 250,000 custom steel wheels a year.
For now, Mr. Simas said Northwest Tire is looking to adjust ordering to keep ahead and may augment its supply with other vendors if necessary. He said the dealership group isn't in a ``dire situation'' for steel wheels, but the segment represents a stable, important part of the dealer's business. Northwest Tire also sells aluminum wheels in addition to tires.
``It's a real steady thing for us,'' he said. ``It hasn't really diminished at all in the last five to seven years we've been doing it.''
Steel, once the material of choice for most automotive wheels, increasingly has been sidelined as aluminum, which is lighter and easier to design, became less expensive. With steel prices rising, some customers who bought on the high end of the steel spectrum may switch to the low end of aluminum.
``It's like bias vs. radial. The gap's closing,'' said Dave Jones, senior vice president of sales at distributor Tireco Inc., which markets both steel and aluminum wheels in addition to its main tire business.
Steel will always have a place on some aftermarket wheels, such as trailer wheels, Mr. Jones said. But its share of passenger vehicles is likely to diminish as aluminum gets less expensive and has better designs.
``I don't think you're going to see it totally evaporate,'' Mr. Jones told Tire Business. ``You're certainly going to see it shrink, to what extent who knows. These aluminum manufacturers are getting more and more creative all the time.''
Mr. Simas said still other customers are dedicated to steel, whether for wheels used for winter weather in Montana or just out of long-standing trust. Besides, he said, a 10-percent increase on a steel wheel that costs $25 is a slight $2.50 extra.
Mr. Kelley agreed that steel always will have a small piece of the aftermarket wheel pie.
``It will never die,'' he said. ``It's still just going to be on the low end of the food chain, no matter what, even with the price increases.''