Thinking Ahead

Tyre manufacturers emphasise forward planning at Hillhead

This year’s Hillhead exhibition – the International Quarrying and Recycling show –– was sold out several months in advance of the event. As far as tyre exhibitors go the usual faces Michelin, Bridgestone and Goodyear Dunlop were there, joined by Marangoni, OTR Tyres, Rema Tip Top and Vacu Lug.

Over 16,000 visitors attended the biennial working event held at Buxton Derbyshire, a four per cent increase on 2003’s figures say organisers. However with the on going global shortage of OTR tyres both manufacturers and distributors were faced with never-ending product availability questions covering all segments of OTR tyres, giant medium and small and all sectors, mining, quarries and construction.

Demand for OTR tyres has fast outpaced world tyre industry expectations. Between 2003 and 2004, global demand for OTR tyres grew around 20 per cent, for some sizes demand was up by 30 per cent. What’s more this demand shows no signs of tapering off. According to Bridgestone global demand for rigid dump truck tyres is expected to be 50 per cent higher in 2005 than last year. Tyre manufacturers are still struggling to meet this growing demand and this will continue to be the case if, as expected, demand outstrips supply until 2007.

According to Continental Tire North America’s director of dealer sales, Jack Fenner, production levels of OTR tyres have remained flat since 1999 having only recently increased. Now, everything the tyre manufacturers are producing is being sold. According to Goodyear Tire & Rubber spokesman Dave Wilkins, every large tyre produced by the company in 2006 is already spoken for. And unlike passenger car tyres, earthmover tyres can not be produced by their hundreds each day.

The main reason for the global OTR tyre shortage is the rapidly expanding Chinese market. The country is consuming vast amounts of raw materials and commodities – such as copper, iron, gold, and coal – and is creating a massive demand for original equipment. In the last two years the price of natural rubber has more than doubled, putting all tyre manufacturers under pressure to increase the price of new tyres. These price increases are set to continue not only due to creeping raw material costs but those of shipping too.

“We fully understand the difficulties our customers are facing because we are also suffering from shortages of the raw materials we need to manufacture these specialist tyres,” said Bridgestone UK’s marketing manager, Barry Coleman. “We are all in the same boat and we want to ensure that we give advice and assistance to our customers during this trying period.”

Both tyre demand for OE and the replacement market is now above capacity supply. In an effort to address the shortage Bridgestone is spending £86 million to expand capacity at its Japanese plant by 20 per cent, but these new plans will not be completed until 2008. Michelin is also building a plant in Brazil to help meet growing demand for earthmover tyres, however this is not expected to be operational until mid-2007, and will be serving North and South American markets.
If capacities are not expected to improve in the short term, and tyres that are produced are likely to be allocated to the Asian markets to fulfil OE demand, what does this mean for the UK and in fact European markets? According to Barry Coleman the situation is going to get “very very tight” and the bottleneck of tyre orders will continue to increase. With current threats that quarries will close due to under efficiency, and with machines left standing due to a lack of tyres, the situation cannot afford to get any worse. It is also affecting the OEMs who can’t produce machines without tyres and so are having to review their product lines.

The OTR tyre situation in the UK may see a marginal improve in the next two years says Mr Coleman but not by more than five per cent. All that tyre companies can do until supply increases is to advise companies on how to make their tyres last, even if that means operating a quarry less efficiently. And so with the current shortage expected to last until 2007 the emphasis is on planning explains Goodyear’s director of Off-the-Road tyres Andy Morris, “there is a definite need for companies to maintain the tyres they already have because they are not available off the shelf. The key to which is forward planning, something which companies are getting a lot better at.” This message was one that all tyre companies attending Hillhead strived to communicate.