New earthmover tyre shortage predicted
Just a few years since the last earthmover tyre shortage peaked industry sources are predicting another squeeze on the production of some of the biggest tyres there are. Last time the problem centred on simple supply and demand, but since then the likes of Michelin and Bridgestone have invested hundreds of millions investing in production. This time the root causes seem to be the delay between investment and construction of new capacity and continuing demand, complicated by the earthquake in Japan.
Financial analysts at Deutsche Bank quoted the head of Caterpillar’s global mining division as saying that the mining industry could face a serious shortage of tyres by the end of this year. On 22 March the head of mining giant Rio Tinto’s iron ore business told Dow Jones Newswires the firm’s Australian expansion plans may be affected “if supply problems with quake-affected heavy machinery makers in Japan are prolonged.” The reason? A number of its Japanese equipment suppliers, including Hitachi, have suffered quake-related difficulties. According to this report, Rio Tinto buys roughly 50 per cent of its heavy haul truck tyres, along with significant amounts of heavy mobile equipment from Japan.
With this segment representing revenues of roughly US$8 billion (around 6 per cent of the world tyre market, according to the analysts) this could, as it did last time, signal an opportunity for lower cost companies to seize sales in while the tyre majors complete their expansion programmes. Michelin, for example reportedly enjoys a 25 per cent global market share in earthmover tyres.
But while lower-costs tyre makers can be a threat to market shares, this doesn’t always translate into reduced profitability at the majors. The laws of supply and demand often dictate price rises. In Michelin’s case the firm’s specialty tyre division, which includes earthmover tyres, reported a high 17 per cent operating profit margin last year (operating profit 430 million euros).
Related news:
Comments