AKRON—The extremely tight supply that characterized the U.S. medium truck tire market last year is expected to continue through the first half of 1999 and then taper off as original equipment demand decreases and new domestic production comes on line. OE demand is expected to drop slightly by mid-year, according to tire companies and the Rubber Manufacturers Association. The RMA expects a 5.2-percent drop in OE shipments compared with 1998, to 5.5 million units, a prediction supported by Bridgestone/Firestone Inc. and Michelin North America.
But gradual shrinking of OE demand will not immediately solve truck tire supply problems nor reduce the need to import substantial numbers of tires, the manufacturers said.
1998 ended with a record backlog in the trucking industry of about 250,000 Class 8 truck tire orders, said Mike Fujimura, Bridgestone/ Firestone vice president of commercial marketing.
The first order of business for tire makers this year is to fill standing orders and catch up as new orders come in, he said.
As long as demand is outpacing supply, tire makers will continue to import tires from their plants abroad, Mr. Fujimura said.
``If we can meet this supply, then we may taper off imports,'' he said, adding that Bridgestone/Firestone expects supply to catch up to demand by mid-year.
All the major tire makers increased imports in 1998 because of an unanticipated 15-percent surge in OE truck tire demand and a 6.4-percent jump in the replacement market.
In response to this strong demand, tire makers began dedicating off-shore truck tire capacity to the U.S. market. Michelin targeted all of the output of its Ballymena, Northern Ireland, facility—about 3,000 truck tires per day—to the North American market. Bridgestone Corp. expanded its truck tire capacity at its Amagi, Japan, plant by 30 percent, saying the project was necessary partly to meet growing demand in the U.S.
In addition to moves made by the Big Three tire makers, smaller tire companies without significant truck tire capacity in the U.S.—including Yokohama Tire Corp. and Toyo Tire USA Corp.—took advantage of tight supply to increase their shares of the replacement market.
Some trucking fleets that generally buy from the Big Three tire makers turned to those companies for tires as 1998 wore on, Mr. Fujimura said.
As a result, radial truck tire imports into the U.S. in the first 11 months of 1998 rocketed 59.4 percent over the same period in 1997, achieving a volume of 3.67 million units, according to the RMA. By the middle of 1998, off-shore imports accounted for about 45 percent of the entire U.S. replacement market in truck tires, according to the U.S. Department of Commerce. Year-end data have not yet been released.
For Michelin, the supply problem kept the company from meeting its goals for gaining market share in 1998, said John Rice, chief operating officer for Michelin Americas Truck Tires.
Michelin expects to be able to meet those goals this year, he said.
Many tire makers are counting on added domestic capacity to ease the pressure on importing truck tires.
``Capacity is increasing almost constantly,'' Mr. Fujimura said of an $80 million expansion at Bridgestone/Firestone's Warren County, Tenn., factory that is projected to increase the plant's truck tire capacity 20 percent by year-end.
Michelin will expand truck tire capacity by more than 50 percent through the year at its Waterville, Nova Scotia, plant and may add more capacity in the future, a Michelin spokeswoman said.
Goodyear, for its part, is investing $15 million at its Topeka, Kan., plant to increase truck tire capacity there by 10 percent and has committed $113 million over five years at its Danville, Va., plant to increase its capacity by as much as 800,000 units annually.
Retreaders also have benefited from tight supply in the medium truck tire market, said Marvin Bozarth, executive director of the International Tire and Rubber Association. But as tire manufacturers ramp up their new capacity, that effect should wane by about mid-year, he said.
The increased penetration of Chinese tires into the U.S. market—up 82.5 percent by mid-1998, according to the Department of Commerce—will affect both tire makers and retreaders because of the tires' quality, low price and wide availability, Mr. Bozarth predicted.