Off-the-road tire dealers who service all aspects of the OTR market can expect a good business year based on trends that began last year, according to Yokohama Tire Corp.'s director of OTR sales.
Gary Nash told Tire Business that construction activity, a rise in copper prices and the war in Iraq all contributed to the OTR market's recovery, which began in June. Replacement units sold in 2003 soared 23.6 percent from 2002 to 405,500, he said.
The Iraq war itself caused radial OTR tire production to soar 67 percent in 2003 while bias tire production increased by only 2,000 units, Mr. Nash said. The military's demand for OTR tires helped end a five-year slump in the OTR market caused by consolidation in the mining industry and the relocation of major mining companies overseas.
Mr. Nash, a keynote speaker at the Tire Industry Association's OTR Conference, Feb. 26-28 in Orlando, Fla., will discuss these trends and industry numbers during that event.
Commenting on the Iraq war's impact on the OTR market, he noted that during the first half of 2003 economic uncertainties caused many customers to use their tires without replacing them for as long as possible. But military orders coupled with a resurgence in demand from those customers who put off new-tire purchases all helped create a market recovery, he explained. The war also depleted inventories as demand overcame supply.
``The way we view it is, if the second half of 2003 is any indication of how the off-road industry has rebounded, then we can see a very positive 2004 and 2005,'' Mr. Nash told Tire Business. He added that because most of the OTR tires currently produced are for military fitments, radial OTR tire production should return to 60 percent after 2005.
``It's good news for the radial producer and bias producer for the next two years,'' Mr. Nash said. ``For the dealer we see nothing but good news for those who are diversified.''
Other issues that will impact the OTR market in 2004 include the proposed highway bills currently in Congress. The Senate bill is proposing approximately $311 billion for highway construction while the House bill is calling for $375 billion. But Mr. Nash said since both proposals would require raising the gasoline tax-a highly unfavorable measure during an election year-he expects a bill closer to $245 billion to pass.
Mr. Nash said regardless of which version passes, new highway money will make 2004 a good year for the OTR market. If the highway bill doesn't pass, he said the OTR market would remain as is with little or no growth.
At TIA's OTR Conference, Mr. Nash said he plans to discuss OTR tire imports from Third World countries and point out to dealers the following disadvantages of selling imports:
* Though low on price, imports also have questionable quality;
* Importers offer no special terms or consignments for dealers, which subtracts from their cash flow;
* Importers offer no sales or engineering support to dealers; and
* Importers generally sell their products to everyone, offering no territorial protection.
An estimated 80,000-100,000 OTR units are imported annually from China, Taiwan and other Third World countries, according to Mr. Nash, who added that because those firms don't report to the Rubber Manufacturers Association (RMA) ``you can't really tell how much is out there.''
He noted that when Yokohama has offered dealers inventory replacement terms and consignments, some dealers have stopped buying imports after seeing the benefits of buying from a major manufacturer.
``Basically, what I'm saying is the dealers and the manufacturers that report to RMA should have an alliance to offset (imports from China),'' Mr. Nash explained. ``I can't tell the dealer, `Hey, stop buying them.' But I can point out these things that he doesn't enjoy.''