Maybe I am late to this party (and I probably am), but there is an epidemic of price increases hitting the market.

This could not come at a worse time for end-users of tire products, and I am sure that dealers will not be happy to inform their customers of such bad news. Across the board, tire manufacturers are citing rising commodity prices as the major reason for bumping pricing.

Rubber pricing is at historic highs. Currently, pricing is at a 10-year high, as the Singapore rubber markets are showing pricing at nearly $4 per kg (a 900% increase over 2000 prices).

Iron ore is approaching $1.76 per dry metric ton. That’s a 630% increase over 2000 prices.

This, of course, will drastically affect the prices that manufacturers pay for steel. Add in high gas prices (considering current inventories of refined fuel are very high), and 6% seems relatively low.

Even if the price increases are justifiable, it can be hard to justify the costs to an end-user, who may be struggling just to get by. There are stories floating about of construction companies that are putting equipment on blocks, so they can take those tires, and put them on another vehicle in their inventory.

Why? Well, if demand for tires is low, you certainly know that there is some weakness in the heavy equipment market. – at least in the used equipment market.

Exports have been a rough market lately, as the dollar’s strength is not due to increasing economic growth, but rather a series of disasters that threaten the global financial markets. Uncertainty and fear have reigned over the past few weeks, as Greece has put the European Union into a position that isn’t exactly fantastic. EU fears have risen over the financial state of Spain, Portugal and Italy.

This has sparked fears that larger countries are on the edge of disaster. The names bandied about include Britain, China, and even the U.S. It seems that China has a real estate bubble that could come back to bite them, as well.

With all this uncertainty, precious metals have taken a turn for the better. Gold reached new USD and Euro highs the other day. Silver is rising at an incredible rate, as it is approaching $20 per ounce. This is a far cry from its cost a few years ago, when it hovered around $12 an ounce for what seemed an interminable amount of time.

Since there is some sign of sustained growth, and due to the fact that governments are having trouble raising revenues elsewhere, it should come as no surprise that Australian PM Paul Rudd has proposed a windfall tax on mining companies. To borrow from Douglas Adams, “In the beginning, the windfall tax was created. This has made a lot of people very angry, and has been very widely regarded as a bad move.”

In response, many mines have suspended their operations, tabled projects, and decided to concentrate their investments in other countries. Rudd seems to think that this will increase investment in mining companies. How that is supposed to happen, I am not sure.

Food costs are out of control, both domestically, and abroad. Here in the U.S., prices were up 2.4%, which is the largest increase in 26 years. China’s food prices were up 5.9%, on signs of inflation. While the Chinese are fine with that, for now, eventually they will have to let the yuan appreciate. I have talked about this scenario before. While we want to buy our cheap, Chinese stuff from Walmart, the Chinese populace wants to survive.

Back to food: While high demand is great for farmers, and ensures that they may be able to fetch decent prices for their crops, the question remains as to whether the profits made will offset fixed costs. Those fixed costs include machinery and tires.

So, we find ourselves back at square one. Mines should easily handle these percentage cost increases. Farmers will do the same, although with a significantly smaller profit margin. As usual, the ones who will feel the squeeze most implicitly will be end users with one or two pieces of equipment.

Unfortunately, raw material costs are high, and will continue to be so, for the foreseeable future. That fact won’t comfort manufacturers or consumers.

That’s the latest news affecting the tire and mining industries.

Until next time, push the pedal down, and burn rubber…just not too much.

[The Tire Pile Blog is written by Kurt Hartman.]