AKRON-Retreaders can expect business in 2004 to be ``better'' than in 2003 as several industry experts expressed optimism in their outlooks for the year ahead.
Recent news of an 8.2-percent growth rate in the U.S. economy's third quarter and increases in factory orders and truck freight have prompted Harvey Brodsky, managing director of the Tire Retread Information Bureau (TRIB), to estimate that retread use will rise 5 percent in 2004.
``I believe retreading will be up,'' he said. ``I think that truck and light truck (retreading) will see a slight increase, and the increase will be 5 percent. That's because the trucks are rolling again. The economy is picking up.''
Marvin Bozarth, a consultant to the Tire Industry Association (TIA), echoed that sentiment, although he predicted a more modest 3-percent increase in retreading for 2004 and a renewed optimism among retreaders themselves.
``I think 2004 is going to be a better year,'' Mr. Bozarth said. ``I think the economy is going to be a lot stronger. Construction is just going gangbusters right now.... I think 2004 is a year where there's going to be more confidence in the industry. People are going to get out and invest a little more in salespeople and equipment and trucks to do the business.''
Housing starts in the construction sector should be strong for the year, he added, and he said he's seen many businesses outside of the tire industry invest in building additions and new equipment. More trucks are moving lumber and other materials and that should bode well for retreaders, he explained.
For most retreaders, the market in 2003 was flat with business down 20-30 percent during the first half, Mr. Bozarth said. Business picked up mid-year and remained strong until about Thanksgiving.
Edward Reading, vice president of international and retread sales for Cooper Tire & Rubber Co., said he is ``cautiously optimistic'' in his outlook for retreading in the new year.
``It's good to see that our customers, who are associated with the trucking business, are busy and doing well and appeared to have turned a corner,'' Mr. Reading said. ``There is an across-the-board uptick in terms of fleets moving freight, trucks being built, trucks being sold, and that usually ties back very neatly to the retreading business.''
However, he also noted that Cooper and other retread suppliers are struggling with ``dramatic'' increases in raw materials costs and have raised prices as a result. He said it is too soon to tell if there is any end in sight to rising raw material costs.
Mr. Bozarth agreed that raw materials costs were definitely among several concerns for the year, and he noted that there seemed to be a shortage in natural rubber and carbon black. Generally, increased sales need to make up for smaller margins caused by raw material costs, he said.
He also said he expects labor costs among retreaders to rise 4 to 5 percent, and energy costs, workers' compensation and insurance costs all to rise, as well.
Mr. Brodsky acknowledged that if anything could damper rosy predictions for the retread industry, it's low-cost new tire imports. Mr. Bozarth agreed with that assessment, saying that quite a few of the intermodal fleets are buying imported new tires instead of caps and casings. He has noticed more imported new tires on drive- and steer-axle positions during visits he's made to truck stops.
``The quality of some of the imported truck tires is getting better all the time,'' Mr. Bozarth said. ``People who would not have used an imported radial a few years ago are now using them. Maybe not in great numbers, but they're testing the waters.''
A Bandag Inc. spokesman said that despite the concerns raised about imported tires, retreaders need to keep in mind that imports primarily are attractive to small fleets and owner-operators running their businesses on purchase price. ``Sophisticated'' fleets continue to buy the best retreads and stick to what they know has worked well for them, he said.