Nowhere to go but up

April 21, 2010

Just when you thought the state of the OTR tire market couldn’t get any worse, you’re right — it probably won’t.  In terms of volume, the North American OTR tire segment has reached its lowest point in 10 years, a Bridgestone Americas Tire Operations LLC (BATO) executive told attendees at the 2010 Tire Industry Association OTR Tire Conference, held late February in Tucson, Ariz.

However, the segment will bounce back, said Angie Jones, general manager, marketing, BATO, Off-Road Division.

“In general, things are improving, but recovery will be gradual. There’s a clear correlation between gross domestic product (GDP) and market demand for OTR tires. For 2010, the GDP forecast calls for consistent, stable growth quarter by quarter.”

A rebound in the housing market will be critical to the OTR tire market’s recovery, she said.

Meanwhile, demand for coal and oil “is projected to be stable, and the demand for steel is expected to rebound in 2010, all the way back to 2008 levels.”

In addition, prices for gold, copper and nickel remain up, which will stimulate mine activity.

Tough questions, straight answers

Jones’ speech was one of several presentations at this year’s conference. A tire manufacturer panel discussion also was held. Participants included Roger Lucas, vice president, Earthmover Division, Michelin North America Inc.; Nelson Richards, national sales manager, Yokohama Tire Corp.; Shawn Rasey, president, BATO, Off-Road Tires; Paul Hawkins, vice president, OTR tire sales, Titan Tire Corp.; and Rongsheng Sheng, general manager, Techking Tires Ltd. Questions were submitted by conference attendees.

Will we see strong growth in OTR tire sales in 2010 and 2011, and will we be faced with any shortages if the economy starts to pick up?

Lucas: It’s challenging to gauge where this market’s going to head. We track a lot of indicators and there’s not a consensus as to when (the economy) is going to rebound. Each month we look at (the market) and ask, “Where’s the bottom?” What we think is that we are there. The rebound is going to be a little slower than what we initially anticipated, but we think there’s going to be a rebound regardless.

Richards: One of the things I see that’s had a dramatic impact on all of our sales has been the construction industry. Until you see a spike in the housing industry, it’s pretty much going to remain the way it is. I think we’ll see a modest increase — 2% to 3% — this year, but I think it’s going to be a slow-go.

Rasey: There is hope for recovery. I think we’re also (looking at) a longer term, more sustainable recovery. It appears we may be seeing something more like that. Last year was certainly a year of inventory adjustments, not only for dealers but for the manufacturers, as well. I can tell you that in certain segments, we’re starting to see some back orders building.

Hawkins: We see some growth in the mining business and the steel business is coming back. With the housing market, I think the best you can say is it looks like it has bottomed out. In 2010, we’ll see some modest growth.
Sheng: I think the worst is behind us. At a global level, I see the market growing moderately. If you look at 2009 in China, the situation was difficult, but we still realized high GDP growth.

Is there a chance we’re going to face shortages of raw materials in the next few years?

Sheng: Generally speaking, I don’t think it will be a problem.

Hawkins: I don’t really foresee any shortages. What I do foresee is raw material costs escalating.

Rasey: I think we are going to see some pricing fluctuations based on the ramp-up of volume again. From a shortage standpoint, I think there’s probably plenty of capacity globally, but as the global economy recovers — particularly a lot of emerging economies that are growing very robustly — there could be some pressure on that infrastructure for supply.

Richards: Escalating cost is going to be the big problem over the next few years. Costs from last year to this year dramatically increased. Everyone has pretty much announced price increases on passenger, light truck and medium truck tires, and that’s bound to migrate to the OTR segment.
Lucas: When you look at shortages of raw materials, I think a lot will depend on how the economy comes back.

Panelists also were asked if they believe giant OTR tire sizes will exceed 63 inches someday. BATO’s Rasey said 63-inch tires, as a category and a product, are still developing.    ■