Thread by @MichaelGrabell

It’s been three years since the pandemic turned the economy upside down. So why are prices still so high?

To answer that question, there may be no better product than the humble car tire.

2/ A tire is something universal that we depend on to live in much of America. But unlike food and gas, it’s not something we typically budget for. As a result, scores of people have turned to GoFundMe to raise money for tires.

3/ On every tire is an ID number tracing a tire back to its origins. Decode it and you’ll discover that tires have been hit by nearly every force driving inflation in recent years.

propublica.org/article/inflat…

4/ As COVID hit in 2020, major rubber producers like Thailand & Malaysia shut their borders, preventing migrant workers from reaching plantations.

That led to a drop in production just as severe storms devastated plantations. Natural rubber futures spiked nearly 50%.

5/ Synthetic rubber and carbon black, which make up roughly half the weight of a tire, are made from petroleum. By summer 2021, their prices were going up. And things only got worse after Russia invaded Ukraine.

6/ Russia had been the world's second-largest exporter of carbon black, the key ingredient that gives tires their strength and color.

“Without carbon black, a tire would be like a rubber band,” said retired tire industry chemist Howard Colvin.

Its price doubled.

7/ At the same time, a tight car market caused by the semiconductor shortage put new & used cars out of reach for many drivers. That led them to hold onto their cars longer and increased demand for repairs & tires.

8/ A long-running trade battle against Asian tire manufacturers was stepped up in 2021, making tires from Thailand, South Korea, Taiwan & Vietnam more expensive to import.

9/ Then the supply chain crisis hit, and the price to ship a container from Asia skyrocketed from less than $2,000 to $16,000+. That meant higher prices for importers, retailers and ultimately consumers.

10/ “Our suppliers were charging us $2,500 shipping surcharges, $5K, $10K. It got up to $15K to $16K,” said Kevin Cates, owner of Tire Town in the New Orleans area. “Imagine what that does to the price of the tires that I have to pass on to my customers."

11/ Tire dealers have also had trouble finding technicians & are paying more to hire them.

“I probably went through like 6 raises in the course of a year,” Tire Town tech Juan Cantu said.

Many retailers raised the labor rates they charge customers.

12/ Now that many of the original causes of inflation have faded away, though, some consumer brands have realized a new trend: Even as they raised prices, customers continued to buy their products. That led to higher profit margins that companies are trying to hold onto.

13/ Major tire brands have a great deal of pricing power. For most customers, a tire is a “grudge purchase.” They have little time to shop around and don’t have a frame of reference on what a tire should cost, because they only buy them every few years.

14/ As one economist said, “They can tell you it’s going to cost whatever it’s going to cost, and as long as it doesn’t sound like it’s made out of gold, you’re going to say, ‘OK.’”

15/ Read the full story here:
propublica.org/article/inflat…