TUCSON, Ariz.—The U.S. OTR tire market is “poised for recovery,” executives from Bridgestone Americas and Michelin North America Inc. (MNA) told attendees of the 2010 OTR Tire Conference in Tucson, although recovery is a relative term since shipments last year fell to a 10-year low.
“There are signs the market is improving,” according to Angie Jones, general manager, marketing, for Bridgestone's Off-Road Tires unit, “but recovery will be gradual” and tied to growth in the gross domestic product and the new housing starts.
Last year was a “stepping stone to better things” for the OTR tire industry, said Roger Lucas, vice president of MNA's earthmover division, who noted although replacement OTR tire shipments fell more than 25 percent last year from 2008, market indications were that the decline bottomed out about mid-year and started to improve in the third and fourth quarters.
On the positive side, the U.S. Gross Domestic Product (GDP) is expected to show consistent growth throughout 2010, albeit only about 2 to 3 percent from the low 2009 levels.
Ms. Jones noted energy demand is expected to be relatively stable for the next several years, essentially guaranteeing a steady demand from the coal industry.
The variables to watch are construction spending and tire dealer inventories, she said.
Specifically she pointed out there's a direct correlation between construction industry em¬ployment and tire demand: When one's up, the other's down, based on data from the past decade.
Construction spending is not expected to recover until 2011 or even 2012, she said, noting the inventory of existing houses for sale has a nearly seven-month back¬log.
This is down, though, from more than 10 months in late 2008.
In addition, she said, the industry has to be careful to track true demand for tires, taking into account demand to fill inventories at tire distributors and end customers.
Shawn Rasey, president of Bridgestone's Off Road Tires unit, echoed her assertion during a panel discussion of OTR tire executives, saying Bridgestone has started to see back orders being filled, but that tire makers need to keep a “level of transparency” in gauging their impact.
Paul Hawkins, vice president of OTR sales for Titan Tire Corp., said retreaders have begun looking for casings again—reflecting their confidence the market is rebounding.
Although replacement OTR tire shipments fell more than 25 percent last year from 2008, Mr. Lucas said, market indications were that the decline bottomed out about mid-year and started to improve in the third and fourth quarters.
As a result, Michelin anticipates OE OTR tire shipments should improve about 21 percent this year vs. 2009, mining tire shipments should be up about 1.3 percent and tires for infrastructure-related equipment should increase about 11 percent.
However, Mr. Lucas cautioned, even with these improvements, the market will be 16 percent below the 2008 shipment level.
Mr. Lucas said Mich¬elin is basing its forecast in part on anticipated GDP growth this year of 2 percent in the U.S. and Canada and 3 percent in Mexico.
Another factor is the inevitable pent-up demand, he added, noting various freight indicators show the tonnage/miles in the past year did not collapse completely, indicating fleets and OTR tire users cannibilized tires from idled equipment and used more retreads, and this behavior can be kept up “only so long.”
The OTR tire industry can help itself this year, Mr. Lucas added, by focusing on best practices, managing raw materials cost variances, emphasizing business services (including those outside of product) and pushing radialization.
The latter is particularly puzzling, he said, noting that in Europe the OTR sector is more than 90-percent radial and there's even a measurable difference between the U.S. (59 percent radial) and Canada (81 percent).