The OTR Tire market has taken a significant turn in the last few months. The major radial earthmover tire manufacturers have stated that they will not be signing any more long-term agreements and that additional supply capability is extremely limited.
Furthermore we have heard from various industry sources that some of the manufacturers will be cutting some of their allocatation commitments to various markets and selected customers due to the market supply and demand dynamics.
As a result of the major brands reaching manufacturing capacity, end-user options (those end users that do not have contracts for their full supply needs) have become limited to sourcing tires from the “Open Market”, seeking second and third tier manufacturers or utilizing used or retreaded tires; and the difficulty is that in many cases, all of these options will likely be needed to help mines achieve a successful and sustainable outcome for their tire supply needs.
Following are some marketing indicators we have been tracking which point to a growing problem:
- Movement of spot (secondary source) OTR tire prices in the past year have shown a 50% increase since the beginning of the year.
- Natural rubber pricing is doubled in price this year and supply of these raw materials has hit a significant shortage.
- All the major manufacturters have announced recent tire price increases.
- 100 to 400 ton Haul Trucks have been shipping at capacity levels during the last 12 months and the major equipment companies are backlogged with orders in these sizes.
- Mine expansions and mine reopening announcments are occuring on a regular basis.
At the moment we are urging the mining companies we work with to begin taking action before the situation worsens which includes shoring up current allocation contracts and reviewing alternative supply options.