May 03, 2011
Giant OTR tires: a true portrait of chaos
Manufacturing process, limited number of suppliers can affect worldwide supply
The giant off-the-road tire segment is relegated to only a handful of manufacturers with the resources to build the largest tires on the planet.
As we noted in the February Commercial Tire Dealer section, the off-the-road tire industry in North America is extremely dependent on the market abroad. Because OTR tires are so highly specialized, and only a handful of manufacturers have the resources to build the largest tires on the planet, this global industry must be analyzed using the chaos theory — “When complex systems were entirely dependent on initial conditions, such as the weather, even the smallest changes could yield dramatically different results in the end.”
What happens in one heavy equipment market has an affect on all other markets in the world. By looking at the retail statistics for Caterpillar dealers, as an example, sales for its equipment in the rest of the world were booming in 2007, but losses in North America were enough to drag down the entire global figures.
Likewise, the respectable offshore gains in the first half of 2008 were brought down by this continent to the degree that the worldwide figures were close to break even. And when the North American demand started shooting up like a rocket in June of last year, it brought the rest of the world with it.
It’s a little scary to think that one heavy equipment market can impact the world like that, but the U.S. and Canada remain two of the largest industrial superpowers on the planet, and according to Caterpillar’s dealer statistics over the past four years, that fact is a long way from changing any time soon.
Another initial condition that impacts the supply of OTR tires is the nature of the markets themselves. Small OTR tires are by far the largest segment, comprising almost 70% of total production. They are primarily used in the construction industry, so the lack of demand in the North American new housing market affects both the original equipment and replacement supply. And unlike large and giant OTR tires where radials have taken over, bias ply tires are still quite popular, especially on graders and small loaders. This means that production in emerging markets can satisfy more demand in those regions because the technology for building bias ply tires is more accessible and has been around for decades.
And while this market is not immune to shortages or supply issues, it can react faster because the tires require less time and materials to build and cure.