"That, combined with stimulus, combined with just pent-up demand and combined with import tariffs and lack of availability from imports, I think we could potentially see the opposite of a cool-off which in Q1 could be an absolutely red-hot market overall. ... So personally, I'm very bullish on what we're going to see in the first quarter."
The good news is tire sales are increasing. The bad news is back orders are increasing, too.
The boost in tire demand has created a back-order problem in the tire industry, partly due to delays in receiving imported products, according to Ron Papcun, SRNA's senior vice president of operations.
"We're facing a significant challenge trying to import product, in particular from Asia," he said. "In essence the entire supply chain is pretty much broken at this point."
He explained that West Coast ports have experienced a 3.5% increase in the amount of import volume while the East Coast ports, which handle less volume, are experiencing a 13.4% increase in traffic.
"So basically what happened is we're seeing bottlenecks occurring in both of these ports," he said. "It's being compounded by holiday, it's being compounded by labor shortages, it's causing equipment shortages. And so, basically, it's making it difficult for any importer in the United States to get their product into the country."
The majority of containers used to ship tires from Asia are held up at U.S. ports due to the holidays. Vessels are lining up at the ports waiting to get unloaded and it's causing bottlenecks and creating port equipment shortages, he said.
"You can expect, if you are importing product into the United States, that those shipments will be delayed, somewhere in the neighborhood of two to four weeks," Mr. Papcun said, adding that no one knows how long this situation will last.
He noted that "it's a good situation to have when you're selling more than you can get, but it is creating issues."
"There's never been a better time to have a supply base in the United States, so we are thankful that we have our plant (in Tonawanda, N.Y., near Buffalo) here and we do about 20% of our volume currently through that plant. So anyone who has a U.S. supplier at this point probably has a slight advantage," he said.
The resurgence in imported tires from Asian manufacturers started in July, with volume increasing 29.5% after plummeting by as much as 55% in May, compared with the year-ago periods, Rick Brennan, vice president of strategic planning, said.
Imports surged 65.2% in August and increased 45% in September with a projected 25% to 30% increase in October, compared with last year.
Mr. Brennan surmised the volumes probably would have been higher in September and October if not for the backlog of container shipments coming into the U.S.
For October, according to U.S. Manufacturers Association data, passenger tire sales were down 5.6%, compared with a year ago, while light truck tires and TBR tires both edged up 1.3%.
For the first half of November, the market appeared to be flattening out a bit, he said, with passenger tire sales down 14.2%, light truck tires down 2.4% and TBR up 8.4%.
"So we're seeing a resurgence and kind of a growth through the third quarter that actually moved us in a better position vs. last year," he said.
"The interesting part is this is all happening as vehicle miles traveled are below last year. We're down 14.6% from the miles traveled in 2019. And even for September, September being a big month for travel, it was down 8.6% over last year. So we've kind of flattened out with the rebound of movement of vehicles and we're still seeing growth in the marketplace.
"I think it's supply-related. A lot of tires coming into the U.S. based on shipments coming in that were delayed during the COVID (shutdown) time. TBR had a drop not as big during COVID, but the rebound has been pretty good. Currently, TBR is only down 1% year-to-date through the month of October versus last year."
Passenger/light truck tire unit sales fell 9% year-to-date through October.
"So as we look through to 2021, depending on what happens with the future of COVID, we may see a slow start to 2021 as we look forward over the next quarter."
SRNA's consumer market share for October increased to 4.7%, compared with 3.8% last year, according to Matt Leeper, SRNA's director of sales — consumer.
On a year-to-date basis through October, SRNA experienced a 5% increase in unit sales, compared with 2019. For the first half of November, sales increased 9.1% while the total market fell 12.5%, he said.
"What we have seen now and we were sort of expecting this, was an extreme increase in Ohtsu (tire brand) orders, specifically Ohtsu container orders. … We're going to have a really hard time filling Ohtsu business over what our normal rate has been in the current environment. And that's due to a couple of reasons — one is global demand is high, another reason is around shipping challenges. ...
"Our fill rates are probably 50%, 60%, 70%, depending on the category, which we hear is the norm across all manufacturers," Mr. Leeper said.
New products contributed to the Falken brand's TBR sales growth in the third quarter, according to Bob Klimm, director of sales – TBR.
October unit sales increased 24.5%, compared with a year ago, while the first half of November saw a 29% jump in sales. Year-to-date, unit sales increased 11.4%, he said.
"Product shortages have become widespread throughout the industry and, believe me, we are no exception. Our back orders have grown substantially the last two months," Mr. Klimm said.
"The good news is we've increased our production orders into our main plant which is in Buffalo, which is also in the process of increasing its output capacity. So we should see some positive things coming from Buffalo to help us with the back orders situation."
He said the post-shutdown rebound seems to be slowing and there is fear of second round of shutdowns around the country.
"But for right now, things are looking bright for the commercial side of the tire business," he said.
He noted that final-mile delivery in the trucking industry "is going gangbusters," due to the surge in online shopping.