Our View: Orange barrel bliss

Annoying or not, orange barrels are a good sign for the tire industry.

While the off-the-road (OTR) tire industry is not insulated from global logistical issues and volatile pricing, strong headwinds in the agriculture, mining and construction sectors suggest continued growth in 2023.

Demand for commodities, particularly of the farm variety, has skyrocketed through the COVID-19 pandemic, and farmers have money to invest.

The U.S. Department of Agriculture predicted that net farm income, a broad measure of profits, would increase 13.8% in 2022, compared with 2021.

"The timing is good for farmers in the sense that crop prices are high, and farmers are making some money, but with aging equipment and more cash in hand, it's time to spend," said Tony Orlando of Bridgestone Americas Inc.

Subscribe to Tire Business for more award-winning news and insight.

Last year, supply chain gridlock hampered the output of original equipment vehicle manufacturers, and the replacement market did very well as more farmers upgraded older equipment.

"Farm economics are always a wild ride," said Blaine Cox of Yokohama Off-Highway Tires America Inc. "... But consumer demand was strong (in 2022), so commodity prices held up, and farmers were able to make some margin."

In the mining sector, strong demand is driven by the need for precious metals used in new technologies and by the fuel crisis caused by Russia's invasion of Ukraine. Add to this the government's aim to increase electric vehicles (EV) on the road and the shift toward renewable energy technologies, and the outlook is positive.

In addition to the need for certain metals for EV batteries and renewable energy infrastructure, the fuel crisis in Europe has driven an uptick in coal mining.

"Mining commodity demand remained strong in 2022, and pricing for copper, coal and gold was strong throughout most of 2022," said Rob Seibert of Bridgestone Americas, adding, "We also began to see the impact of the government infrastructure package, which will play a key role in bolstering demand for critical raw materials needed for investments in EV, green energy, utilities and other polices."

Now, back to those orange barrels. Expect to see more of them as federal funding kicks in for infrastructure projects around the country.
Despite a slowdown in new housing starts, as a result of increasing interest rates, the construction market has managed to maintain momentum due to significant investments from the U.S. government, including the Infrastructure Investments and Jobs Act and Inflation Reduction Act.

"Everyone is screaming 'recession and high interest rates.' Construction is still strong in many parts of the country," Chan Phothisane of Zhongce Rubber Group Co. Ltd. said.

"The housing market has slowed down due to high interest rates. We expect growth in industrial construction. U.S. highways, rails, bridges, airports and U.S. ports will be upgraded. The Inflation Act of 2022 has brought manufacturing back to the U.S."

So don't knock (or run into) those orange barrels!