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Over-inflated: demand has been exceeding supply in the off-road tire market.

The off-road tire market today is tighter than a rusty lug nut. If you are shopping for tires, do not expect to find bargains.

The boom in scrap metals, mining, construction, demolition and other heavy industries in the past two years has caught makers of off-road tires flat-footed. Add to that mix demand from overseas, and the tire market is as tight as a drum.

Makers and dealers of many machines find that tires are the weak link in the supply chain.

ELASTIC DEMANDS. Stretching tire life as safely as possible beyond the typical 3,000- to 4,000-hour working life is common practice. Proper inflation and good maintenance are good places to start.

However, eventually tires on any machine have to be replaced. Be prepared well in advance to hear your local off-the-road (OTR) tire dealer talk about long lead times, tight supply and higher costs.

Shortages are common for tires 26.5 inches and larger, but spot shortages are reported in tires as small as 17.5 inches, with delivery delays of up to four months for larger sizes.

"I've been hearing from our group that they can't get tires," confirms Bill Turley with the Construction Materials Recycling Association (CMRA). "Even excavators can't get tires." (Turley is also associate publisher of Recycling Today Media Group publication Construction & Demolition Recycling.)

The biggest shortages appear to be in the Caterpillar 777 truck tire line and for tires in the 57-inch range.

To solve the shortage on their new equipment shipments, manufacturers like John Deere Construction have reached agreements with several suppliers, not just one or two, to assure a steady supply.

Chuck Berg at Coastline Equipment, Long Beach, Calif., says his region is seeing shortages for the Liebherr 992s, 980s and all big truck tires. Coastline deals in a wide range of equipment, including Liebherr.

"I think there are more problems with trucks and wheel loaders--the bigger tires," he says. Like the rest of the industry, he has had problems for the past 18 to 24 months.

"The reason there is a shortage of OTR tires is they are all going to China to help them build their roads," says Jeff Erbig, Advance Tire Inc., New Brunswick, N.J. All of the premium tire makers, from Goodyear to Michelin, are short, according to Erbig. "Premium tires are scarce," he says.

But there is a silver lining. "It helps push people to take advantage of the TY Cushion tires," the line of solid tires that Advance Tire sells.

"The only time you can't use solids is if you don't shut the machine down periodically," Berg says. "The rubber has to cool."

So tight have things become that even casings for recaps are becoming scarce. This not only affects scrap dealers but also those using heavy equipment in similar industries, like transfer stations and demolition firms.

The tire situation has had an impact on new machinery sales. "Markets are good recently, and people want to buy," Turley says. "It has to be a dilemma for companies like Caterpillar and Komatsu."

Jesse Chuang, sales manager for TY Cushion Tire, City of Industry, Calif., finds the shortage a bit of good news, as recyclers are moving away from pneumatic tires to solid ones. "People in the recycling and scrap business have no other choice," he says.

"Ultimately, that is the direction they should be going, anyway--away from pneumatic tires," he opines.

The past 18 months have been good to Chuang. He says the increases in rubber prices and delays in production from the major manufacturers of pneumatic tires are reasons for the shortages that are driving people to solid tires.

While he agrees that the tire market for loaders is difficult to navigate, Bennie McGill, Midwest regional sales representative for SETCO, Idabell, Okla., says that tires for large hauler trucks will be the next big shortage area.

VICTIM OF PROSPERITY. Ironically, the relatively good markets in many segments of the recycling industry are part of the cause for the tire shortage. With a bit more cash in the checking account, recyclers are more willing to buy new equipment. That adds further pressure to the dwindling availability of big tires.

McGill also points the finger at the Asian markets, but for a different reason. "Japan and other overseas markets pay upfront for their tires, and they are willing to pay at 100 percent of suggested retail price. They don't dicker so much," he says. "Americans want to negotiate price and wait 30 to 60 days to pay. Who would you sell to--someone who will pay full price today or someone who wants to pay two or three months out?"

The answer is clear, at least, from the seller's point of view. And, for McGill, the problem has become an opportunity. "We don't have a shortage. The shortage of air-filled tires has helped us," he says. That is because SETCO produces solid rubber tires.

The situation has gotten so tight that Advance Tire sees new machines coming in with wheels but no tires.

Recycling is not the only growing market. The global boom in demand for equipment for mining and quarrying and the increase in housing starts are also putting pressure on heavy equipment. That situation coupled with inelasticity in demand for tires led to the crunch.

The manufacturers could not produce the number of moulds necessary to meet demand. "Demand was high, especially for the bigger tires, but we're getting a lot more tires in," says Craig Olson, manager of marketing communications for Deere & Co., Moline, Ill. Part of that is old suppliers stepping up, part is new suppliers offering product.

Caterpillar says it is working with dealers, customers and suppliers on this industry-wide, global challenge of supply and demand. "We are focusing the expertise of 6-Sigma teams across the company to continue to improve availability of tires," says Cat's Sharon L. Holling. "Excellent customer service and product safety and quality are top priorities to Caterpillar manufacturing and to our dealers, who work together as a team to meet customer demands."

DOWN THE ROAD. "Who knows how long this is going to last?" asks Berg.

"People are being more creative in what they are doing," he says, adding that solid tires are being used for applications of all sorts. A number of companies are replacing the dual tires on some Liebherr equipment with "super" singles, he says. Many are moving from pneumatics to solid tires.

"The price-to-value is there," Berg continues, noting that, while the cost of a solid tire can be double the cost of an air-filled tire, the life expectancy can be two to three times as long.

Erbig says he expects the shortage to be long-term. "It started a year or so ago," he says. "I expect it to continue through 2007 or longer."

McGill agrees that 2007 will be similar to 2006. He sees a constant uptick in rubber prices. "Prices have gone up for seven consecutive quarters," he says. They were hit with an increase in September, another in October and suppliers tell him there will be a third increase in December.

"We pass that cost along, not in creasing our profit, but like it is a fuel surcharge," McGill says.

In some cases, however, the shortage has not had much impact. Lee Gibson, president of Gibson Machinery, Cleveland, says his dealership has not had any problem. "We buy Sennebogen [material handlers] and loaders. I don't see any problem at all."

Caterpillar's Holling says, "This is very much an industry-wide issue. But because of our global scale and market size, we think we're as well positioned as anyone to work through this shortage." She adds, "We believe that some additional tire capacity will come on line in late 2007, and it's probably going to be 2008 or 2009 before the tire industry shortage for very large tires will ease."

Olson agrees. "We are in pretty good shape today. We're over the curve. We should be good for 2007 and 2008, especially with the softening in the housing market helping us."

However, other regional dealers and suppliers are griping about the price increases. They say it makes it impossible to give a firm price quote on tires that can last for more than 30 days.

John Deere's Construction and Forestry division has suffered like anyone else. "We think that, from our standpoint as a manufacturer, the shortage is almost over," says Deere's Olson. The company got hit a year or so ago with the shortage. "We worked a deal with our tire suppliers," he says.

Deere arranged deals with several firms and now, Olson says, has all of the tires it needs for new equipment.

While supply may remain tight for another year or so, it is unlikely to be a long-term problem, otherwise companies like Goodyear and Michelin would be building more capacity or switching production from other lines to the larger tires, observers say.

That is good news for scrap dealers moving away from pneumatics. Some of the sting of the initial acquisition price of solid tires has eased recently, with the price gap between solid and pneumatic reportedly narrowing.

On the pneumatic side, the radial vs. bias-ply tire value proposition shows a price advantage in favor of the bias-ply, sources say. Often, bias tires cost about half the price of a good radial. However, their shorter working life--typically half that of a radial--can even things out in the long run.

Right now, there is plenty of finger-pointing on in the OTR business.

"I'm concerned that everybody blames the equipment dealer for the situation because it is the dealer they see regularly," Berg says. "Really, it's the tire manufacturers they need to talk to."


Ideas for inventorying tires available in an online sidebar at

The author is a Recycling Today contributing editor based in Cleveland. He can be reached at
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Author:Harler, Curt
Publication:Recycling Today
Date:Nov 1, 2006
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