February 19, 2010
OTR tire forecast: gloomy
Mining industry woes will impede progress, says expert
By: Mike Manges
Having consulted for some of the largest mining companies in the world for the better part of the last half-century, Richard Bullock knows mining.
As a member of Purcell Tire & Rubber Co.’s board of directors, Bullock — who also serves as a senior associate with minerals industry consultant Behre Dolbear & Co. Inc. — knows OTR tires, too. (He teaches mining engineering courses at the University of Missouri, as well.)
Bullock’s background gives him a unique, birds-eye view of the mining industry and how the various dynamics within that industry impact OTR tire sales.
In this exclusive interview with Commercial Tire Dealer, he discusses the state of U.S. mining, the impact of the recession on mining activity, pending legislation he believes will be disastrous not just for the mining industry but also for the nation’s economy, and more.
CTD: What is the current state of the U.S. mining industry?
Bullock: The mining industry runs on financing. Venture capital has virtually dried up. Mining isn’t that popular as far as venture capital goes, (but) in tough times, it’s even harder to raise money to bring on new projects.
CTD: So as a result, mines have pulled back on production?
Bullock: They have, and they’ve stopped developing new mines — not everywhere, but certainly in the U.S. From a normal year, the industry is probably down 20%.
CTD: What impact has this had on commodity prices?
Bullock: They started dropping rapidly, some faster than others. Copper and zinc were hit the hardest, at least out of the base metals. There was a group trying to reopen some zinc mines in Tennessee. They put about $30 million into the project, but the zinc price went from $2 down to 70 cents. They canceled the project because 70 cents was very close to their break-even and they couldn’t afford it. So they sold (the operation) to another company.
CTD: Mining has always been a boom-bust business, but it seems like the most recent decline happened a lot faster than previous downturns. Is that an accurate observation?
Bullock: Not only that, but I’d say the recession in general across all sectors was quicker this time. Mining is no different (than other industries).
Once mining companies realized they weren’t going to be able to sell their product, they wisely cut back their production very quickly. Sometimes they don’t do that. But this time they reacted very quickly, and therefore didn’t have to carry big inventories.
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