LOUISVILLE, Ky.—It may be a cliche, but the International Tire & Rubber Association's "2000 U.S. Retread Industry Report and Forecast for 2001" is very much a "good news, bad news" document.
"There is some positive news but, unfortunately, some negative news," said ITRA Executive Director Marvin Bozarth, who wrote the report that appeared in the December issue of ITRA's Tire Retreading/Repair Journal.
According to the report, even though many tire manufacturers announced price increases in 2000, most retreaders were not able to raise prices last year.
Mr. Bozarth told Tire Business falling sales of Class A trucks and trailers are driving down new tire prices as tire manufacturers divert original equipment inventory to the replacement market.
Another factor depressing domestic retread prices is the increased use of low-cost imported new tires from India and China by intermodal truck fleets.
However, the expected economic slowdown in 2001 could help retreaders if the amount of freight being shipped decreases. That would force trucking companies to look for ways to cut costs, Mr. Bozarth said.
The number of retread plants continued to drop in 2000, falling by 108 to 1,123, the ITRA report said. Bandag remains the leading retread system with 393 franchised plants—35 percent of the total.
Four companies—Bandag Inc., Bridgestone/Firestone Inc., Michelin Retread Technologies Inc. and Goodyear—account for 158 plants, about 14 percent of the total.
Cost pressures and slim margins are fueling the move to fewer retread plants with larger capacities, Mr. Bozarth said. "If you're still in the retread business today and you're planning on being in the retread business in the next five years, you'd better be more efficient," he said.
Over the past three years many retread plants have added new equipment, including high-tech inspection machines, observed Mr. Bozarth, who believes that trend will continue. "It's expensive, but it improves efficiency and cuts costs."
Most of this equipment is imported, as the strength of the dollar has made imported tread rubber and equipment less costly, he said. The report also said raw material prices held steady in 2000, but could rise if oil prices continue to escalate.
Based on preliminary data, ITRA estimated total U.S. retread production fell in nearly all categories in 2000—led by a 50-percent drop in passenger tire retreading to 950,000 units.
This segment is projected to drop again this year to an estimated 760,000 units.
Other retread categories (light truck, medium truck, OTR/earthmover and specialty) also experienced single-digit percentage drops from 1999 based on estimated production for 2000.
In the light truck area, retread production slipped 6.6 percent in 2000 to 5.7 million units, the report said, with a further decline to 5.5 million units likely in 2001.
In medium truck tires, retread production fell 5.2 percent in 2000 to 16.5 million units, the ITRA estimated. It projected a slight rebound (1.2 percent) for 2001.
As for OTR and specialty tire retreading, the ITRA expected 2000 production to fall slightly in both categories but remain flat in 2001.
A good retread customer is the U.S. Postal Service, which uses LT195/- 75R14 tires that are being retreaded "in substantial numbers throughout the U.S.," Mr. Bozarth reported.
The number of light trucks using steel-cord tires also has increased, he said, and that's likely to generate more retreadable casings.
Mr. Bozarth expressed concern about the effect of the economic slowdown on the OTR/earthmover market segment.
"If housing starts are down, that's going to affect earthmover retreading," he said.