SOUTHHAMPTON PARISH, Bermuda (March 5, 2002)—Replacement demand for radial off-the-road tires has reached a watershed: Sales of the radial variety of the behemoths are expected to account for 50 percent of the U.S. aftermarket this year, according to industry data.
However, no one's readying an epitaph quite yet for the venerable bias-ply OTR tire. It still accounts for more than a fourth of original equipment shipments, according to data presented by Jack Fenner, director of dealer sales, commercial group, Continental Tire North America Inc. He spoke at the recent Tire Association of North America Off-The-Road Conference held on Bermuda.
The shift to radial in both the OE and replacement markets is a positive sign in an otherwise shrinking industry. U.S. replacement demand for OTR tires fell 2.4 percent last year, to 136,175 units, after slipping 6.6 and 6.4 percent, respectively, the previous two years, Mr. Fenner said.
OE demand has been up and down the past several years—down last year 13.1 percent after rising 2.5 percent the year before, which was preceded by a 12.6-percent drop. The net effect? Last year's shipments of 58,371 units are 18.7 percent smaller than the 71,800 units reported in 1997.
OE shipments reflect heavy equipment sales trends. Sales of earthmoving equipment in 2001, for example, were down 11.6 percent with a further drop expected this year, according to a forecast from the Construction Industry Manufacturers Association. That same survey showed sales of lifting equipment down 22.9 percent.
Overall, shipments are expected to rebound this year, by about 2.5 percent, and in 2003, by 1.25 percent, according to Rubber Manufacturers Association forecasts, Mr. Fenner said. The constant, gradual shift to radials is increasing the value of the market steadily as well, but no concrete details were available.
Regarding radialization, tire manufacturer executives participating in a panel discussion said there is still quite a lot of room for bias-ply tires in the OTR markets.
“You really have to look at the cost per hour,” Mr. Fenner said, referring to a customer's buying decision.
“Bias and radial will co-exist in this market for quite some time,” said Tom Walker, global general manager, OTR tires for Goodyear. “Bias still perform well in certain construction applications.”
“There's still room to improve the bias tire,” said Gary Nash, director of OTR sales for Yokohama Tire Corp. “Yokohama, for instance, is adding steel breakers in certain applications, and overall we're working to improve high heat resistance and cut prevention.”
The two most popular replacement sizes in 2001—20.5R25 E-2/L-2/G-2 and 20.5R25 E-3/L-3—are still less than 40 percent radialized, the industry data show, although the E-3/L-3 versions showed extraordinary radial growth last year.
In addition to new tire shipments, retreading still plays a key role in the OTR business, with retreads accounting for more than 450,000 units in 2001—or more than three times the number of new tires. OTR retreading slid 5.1 percent last year, according to data from the International Tire & Rubber Association, but production is expected to rebound this year by nearly 5 percent to 473,000 units.
The OTR retreading industry has seen capacity contract in the past year—Bridgestone/Firestone closed its Conyers, Ga., plant; Fountain Tire Ltd. shut down production in Kamloops, British Columbia; Goodyear is closing three U.S. plants and consolidating capacity at two centers; and Northwest Retreaders Inc. suspended production at the Hudson-Odom plant in California.
The OTR retreading market is operating in a tough environment, Mr. Nash said, where the difference in prices between new tires and retreads is shrinking.
This situation is particularly acute, Mr. Fenner said, in certain sizes where Chinese manufacturers have chosen to compete. “There's a place for (imports), especially where the operators are concerned, primarily with purchase price.”
Manny Cicero, president of Brigestone/Firestone Off Road Tire Co., called the import dilemma a “cyclical, dollar-related phenomenon” and blamed the pricing situation, in part, on dealers who “perpetuate the problem by buying low-ball products.”
Yokohama's Mr. Nash cautioned those in the audience to tread carefully with some imported products, noting that they have to buy in container-loads only, and, “if something goes wrong, who do you go to for adjustments?”
Of the myriad sizes of OTR tires available, the 20 most prevalent sizes represent 71 percent of total replacement shipments, Mr. Fenner said. Sales of the newest addition to the OTR tire field, the 63-inch radial, nearly doubled last year, albeit to only 692 units.
In terms of distribution, Texas was the largest consumer of OTR tires last year, supplanting California in the No. 1 slot on the strength of 17 percent more shipments there, Mr. Fenner said. Sales of 14,700 units in Texas represented nearly 11 percent of 2001 U.S. shipments. The next largest states in terms of shipments were Pennsylvania, Florida and Arizona.
Eight of the top states showed declines in shipments last year, with Texas and Colorado being the exceptions.