CARLSBAD, Calif.—During the Tire Industry Association's recent Off-The-Road Tire Conference in Carlsbad, Tire Business sat down with Brian Hayes, vice president of manufacturing for Purcell Tire & Rubber Co., to talk about the OTR tire retreading market.
He noted that, like commercial truck tire retreading, OTR retreading lowers the overall costs of the tire assets for a mining or construction company. Aside from fuel, tires are probably the biggest expense the mines have, he said.
Here are some of the issues Mr. Hayes addressed:
What are the major concerns facing the OTR retreading market?
“Just the lack of business in general in terms of, on the bigger side, the
mining side is really soft with coal and aggregate....
“The best part about retreading right now is the smaller stuff. The small construction sizes we're seeing a little uptick in that right now. But it's just the slow economy.
“The influx of some of the foreign brands into the market also is making an impact, too, in terms of affecting retreading. Since the tire shortage that happened back in 2006-2007, there was a tremendous amount of supply that came online in 2009-2010 and a tremendous amount of supply was there, capacity was built up.
So now as the economy is slowing down with all this supply, it's a matter of supply and demand. The demand is not there right now, there's a tremendous amount of supply, prices are coming down on the new tire side that's affecting the retreading market.”
Is there a casing shortage in the OTR market?
“It depends on the size. Certain sizes are tougher than others. But because of the weaker price on the new tires, it's starting to generate some casings out there. But then again, with a lot of the mines shutting down, depending on what region of the country you're in, there could be some issues with casings not being generated because mines are shutting down on the larger size tires. It depends on where you're at. But casings are always available.”
What's your stance on proposed U.S. duties on OTR tires imported from Asia?
“Trade should be fair. At the end of the day I don't think countries should subsidize manufacturers to help lower the cost. From our standpoint the bottom line is we're seeing a lot more foreign brands in the marketplace and those tires are not as retreadable, have proven to not be as retreadable, as some of the major brands that are out there. So it's because of that dynamic, we're starting to see them have an impact. Will their casings improve? Hopefully, but I don't think they're going anywhere anytime soon.”
Are the low prices of foreign brands impacting your retreading business?
“Oh, yeah, for sure—similar to the commercial side. Depending, again, on the application, you have some operations that would just as soon go ahead and buy new as opposed to a retread. There's a concern for that. It's important for us to explain the numbers, talk about the numbers.
“If you're buying a one-time disposable tire vs. a tire you can maybe retread once or twice on the earthmover side, it just comes down to sheer economics. When you explain that value, I think that you're able to convince the customer that a more premium product along with a retread is the best way to go.”
Is it difficult to get into the OTR retreading business today?
“The capital expense to start up a retread shop today is tremendous. The retreaders that are in the business today have been in the business for a long time. There are very few of us and it is a small niche market. Purcell, for example, has a footprint that covers the entire United States, so we're centrally located. We're even in parts of Canada and Mexico with our retreads. So even though there are very few of us, it's a very global reach, with us anyway. Some of the other people who are players in the market are more regional, but for us it's a very global reach.
“There's plenty of retreaders.... There's never enough business. But I don't see anyone jumping in. You might see someone buying somebody out. You might see people selling, things like that. But I think you're going to see what you see. It's just a tremendous amount of capex associated with the process.”
What is the biggest market Purcell is involved in?
“Purcell is kind of unique. We're diverse through the entire industry. We're in passenger, we're in commercial, we're in off-the-road, we're in wholesale. So we touch every segment of business. Retreading is our core business. It's who we are, it's what we were founded on, basically. We're a big player in that market. We've got a mining division and we touch gold, we touch copper, we touch lead, we touch iron ore, we touch them all.
“And that's a good thing for us because with the impact that coal is having, we don't have all our eggs in one basket, so to speak. We're diverse throughout the entire mining sector, too. We're able to say, 'Coal mining is not so good; the gold mining is OK.' I know of people at this conference who are all into coal fields and it's been devastating for them. For us, it's not so bad. Diversity is good.”
What are Purcell's plans this year?
“We're continuing to invest. Even during these slow periods, it's a great time. The lead time is so long on new equipment, you kind of have to take that leap of faith or have that vision down the road to know, 'Here's where we're going to be in six months, probably, so let's go ahead and place this and do that.' We're continuing to reinvest in our plants with new equipment and molds and buffers.”
To reach this reporter: [email protected]; 330-865-6127; Twitter: @kmccarr