The global mining president of Caterpillar Inc. recently was quoted as saying the following: "By the end of this year, or early next year, we will be in a potentially serious tire shortage situation."
Was what Caterpillar's Chris Curfman, interviewed by "Reuters" during the CRU World Copper Conference in Santiago, Chile, on April 7, true? We decided to ask mining tire expert Gary Nash to comment on the story.
Nash, vice president of OTR sales for Yokohama Tire Corp., didn't use the word "serious" shortage, but agreed demand will be greater than supply for the next few years.
"The off-the-road industry historically has seen many peaks and valleys, normally lasting four to five years," he told us. "However, ending in 2001, the industry witnessed a growth period lasting longer than the normal growth cycle.
"This growth period caused inventories to be depleted, attributable to both strong U.S. and global demand that far exceeded supply from all manufacturers. During the peak periods of 2004-2008, all manufacturers refurbished existing and/or added new factories.
"They increased production dramatically -- only to be faced with a downturn in the economy beginning in 2009 and lasting the entire year. Subsequently, this forced many manufacturers to curtail production and some factories to reduce work force to very low points.
"At this time, large inventories started to build up as some large mines also virtually came to a standstill. Large projects were put on hold due to financial conditions concerning the erratic market downturn. Uncertainty prevailed for the future."
Demand in 2010
Nash said that last year, Yokohama anticipated a 3% to 5% growth in the market, only to be "pleasantly surprised" at seeing growth levels at 18% to 30% instead. "We went from having a large inventory build-up in 2009 when supply exceeded demand, to the lowest inventory levels the company has ever had when the market turned around the following year."
Yokohama was not the only OTR tire manufacturer affected. All surplus inventory from manufacturers, dealers and users was depleted.
In addition, increasing production was somewhat delayed due to the re-hiring of employees and the moving of employees who had been placed in other positions back to OTR manufacturing .
"Short supply did exist on some sizes, but to due to the oversupply that existed at the beginning of 2010, the impact was not fully realized until late last year," he said.
What the future holds
Yokohama anticipates that global demand for giant tires -- including those from emerging markets such as Brazil, Russia, India and China -- will far exceed production, and will continue for several years, according to Nash.
"Even though mass production exists today, raw materials, steel cord and other products used in production of OTR products have become more difficult to obtain with material costs escalating.
"The only segment of the OTR industry that is slow to recover is home building, with construction tires used in site preparation being practically nonexistent.
"What do we see for the future? The global demand is far exceeding production, plus all markets other than home building is growing at a very fast pace. The projections currently are that the short supply will continue to exist for two to three years, which will allow manufacturers to catch up. However, the demand for giant tires will continue for several years."
Nash said Yokohama works closely with its customers in determining what they need the most .
"While our parent company, the Yokohama Rubber Co. Ltd. (YRC), is a global company that looks after the needs of its customers worldwide, the U.S. is the largest market for YRC, so a large percentage of our products is given to us based on our projected budget."