OTR Tire Forecast: Cautiously Optimistic
When it comes to demand for OTR tires, as well as mining and construction industry activity, did 2019 live up to expectations? What will 2020 bring?
With the 2020 Tire Industry Association Off-the-Road (OTR) Tire Conference taking place later this month, MTD posed these questions – and a few others – to tire manufacturer representatives who participated in the panel discussion that was held during last year’s edition of the event.
Panelists include Bruce Besancon, vice president of off-the-road sales for Yokohama Tire Corp., who will deliver the keynote address at this year’s OTR Tire Conference; Doug Kershaw, vice president of Balkrishna Industries Ltd.’s BKT USA subsidiary; Jimmy McDonnell, vice president of sales and marketing, Maxam Tire North America Inc.; and Shawn Rasey, director of global development, earthmover tires, Continental Tire the Americas LLC. (Ray McElroy, who participated in last year’s panel, has since joined BKT as the company’s OTR technical services manager.) Here’s what they had to say.
MTD: Did 2019 live up to your company’s earlier-year expectations/projections, in terms of both construction and mining industry activity and demand for OTR tires, and if so, in what ways?
Besancon: Overall, everything met our expectations. We’re now into the third year of a presidential administration that has been fairly even-handed toward business and particularly toward the mining business. However, we have seen – particularly in some areas – a little bit of a downturn in the coal market. It didn’t fall off a cliff. But I think there’s a little more concern as we move into the new year as to what the outlook is going to be. We’ve seen the construction market hold steady. Construction seems to be concentrated in pockets around the U.S. The western states seem to be doing more and have more projects going, as well as parts of the southeast.
Kershaw: Demand for our products improved this past year and we foresee this demand will continue to grow into 2020, as we continue to expand out dealer network.
McDonnell: Yes. Overall, we continued to realize significant growth in all segments we participate in through product line expansions, new product launches, and increasing share of account.
Rasey: Our full-year results for OTR will be very close to our original internal growth targets for 2019. The overall market demand for the U.S. will be somewhat less than what was originally projected last year, although those results vary by segment and industry application.
MTD: What’s your industry forecast for 2020?
Besancon: I think we’re going to see a somewhat similar year (to 2019.) I do believe that anytime there’s an election year, people sometimes take a wait-and-see attitude. They want to see which way the wind is going to blow before they commit to higher inventory levels. I do believe there is a little concern in the marketplace as to which way certain policies will go and what’s going to happen with tariffs (and) our relationship with China. I think these things will clarify themselves in the first six to nine months of the year. The one thing that stays consistent is that the strong players will remain strong. In the last year, we saw a lot of consolidation and that’s been a big factor. The big guys seem to be getting bigger.
Kershaw: We see demand growing with new construction in housing, roads and infrastructure throughout our marketplace. OTR tire demand has increased and will continue to increase as older machines and machines purchased over the past four to five years start to need replacement tires. The recent increase in mining activity across most of the U.S. has added a number of tires being sold to mining accounts. The mining business in the U.S. remains strong and the long-term potential for continued growth is good.
McDonnell: We see the overall market being relatively flat in 2020 compared to 2019. But, of course, an election year always throws some curve balls that are unexpected.
Rasey: We’re cautiously optimistic about actual demand for 2020, particularly since it’s an election year. Based on the politics of any election year, it’s not likely that any new sweeping infrastructure programs will be passed by Congress.
However, the easing of the regulatory environment over the past few years, coupled with a low unemployment rate, has provided a nice boost to construction, quarry, and mining activity for the earthmover segment.
MTD: From your perspective, what trend or development will have the biggest impact on OTR tire dealers in 2020?
Besancon: Every dealer is going to have to look at how close they are to their customers and what they are doing to differentiate themselves. Everyone has to be dedicated to customer service. That means being dedicated to safety. And they have to be dedicated to service levels – having the right people who are trained and can do the work. The customer has to have faith in the dealer and his or her personnel.
Our business has been much more professionalized. We have more people who are trained at a higher level and more people who understand how tires work with machinery. The fundamentals are going to be the drivers.
Kershaw: The biggest continuous trends/developments in the OTR business for 2020 and beyond is the need for heavy carrying capacity (two- through four-star rated) and higher speed-rated tires, and multi-use tires built for both loaders and dump trucks, with articulated dumps and loaders moving more weight at a faster speed.
Also, with infrastructure being a priority in a large portion of the U.S., the need for grader, loader, articulated and scraper tires in mostly radial designs will increase.
McDonnell: The most unsettled issue is the trade war impact in the OTR business. Depending on whether anything changes or not, it could have a significant impact on the choices (made by) OTR tire manufacturers.
Rasey: I think that it’s probably going to be a combination of several things. The rate of change and absorption of technology at dealerships will continue to be a key focus area for most. That, coupled with employee turnover and the recruitment and training of sales/service personnel to replace retiring team members, is another on-going challenge.
Both of those challenges – along with continuing to find ways to profitably differentiate their sales, service and solution offerings from competition – will dominate their day-to-day activities.
“Any one of these challenges, by itself, takes serious management focus,” notes Rasey. “But when combined, it will require having a solid game plan and quality managers to keep their focus on what matters the most” as the market evolves. ■