Tire Shortage Could Last Until 2007

Mon April 18, 2005 - National Edition
Pete Sigmund

Tires for construction equipment can be as much as 8 ft. in diameter and cost $8,000 each. Now, as demand for them is booming, the construction industry is suffering from a serious global shortage of large and medium-size off-road tires for wheel loaders and other equipment.

The shortage, which is getting worse, impacts production at major equipment manufacturers, making it more difficult to deliver on schedule to contractors. It also is hurting contractors (especially in the mining industry) who are increasingly experiencing problems obtaining larger wheeled equipment and replacement tires when they need them.

Equipment and tire manufacturers said the shortage rivals 2004’s crisis in obtaining steel and is due to surging worldwide demand for equipment as construction activity on highways and buildings roars ahead in the United States, China, Iraq and other global locations.

Manufacturers simply can’t keep up with the clamor for tires.

“I think 2005 will be the year of the tire shortage just as 2004 was the year of steel shortages and problems with steel pricing and availability,” said Nick Yaksich, vice president, global public policy, of the Association of Equipment Manufacturers (AEM) headquartered in Milwaukee, WI. (Yaksich is based in Washington, D.C.)

Overwhelming Demand

Dave Wilkins, a spokesperson for over-the-road tires of Goodyear Tire & Rubber Co., Akron, OH, told Construction Equipment Guide (CEG) that the tire industry “is struggling to meet demand from the construction industry,” particularly China, and predicted that the shortage in tires for construction equipment will probably continue until late 2007 (see A Long-Term Problem, page 155).

Contractors Experience Delays

The shortage is walloping contractors in the mining industry, sources told CEG, and is becoming more painful for other contractors as well.

“Contractors are having some trouble getting tires, but the mining industry is 100 percent worse because it uses bigger tires,” said Al Chicago, president of Purcell’s Western States Tire Co. in Phoenix, AZ. “Contractors do use some small and medium size earthmovers and can utilize different types of tires, both radials and bias. The mining industry, however, uses mainly radials [where the most shortage exists] because no bias tires are being built for this equipment.”

In mining, there’s a particular shortage of the Cat 777 truck, of all 57-in. tires, and of tires for surface mining equipment, Chicago said, adding that contractors outside of mining also are hurting.

“There’s definitely a shortage of tires and it’s putting some hurt on contractors, especially the ones who use a little bit bigger equipment like the 777 truck with its large tires and some scrapers and their tires,” Chicago said. “The problem will probably get more serious for them because the shortage will get even worse and will affect contractors more and more as time goes on.

“Contractors sometimes can’t get replacement tires,” Chicago added, “and manufacturers, because they’re having a hard time getting tires, can’t ship them equipment. Manufacturers are holding up deliveries of the larger trucks and the big mining equipment because they don’t have tires.”

Asked what types of equipment are most affected outside the mining field, Chicago said, “Wheel loaders, scrapers and trucks, and all sizes of tires, including 25-inch, 33-inch, and 49-inch.”

Equipment Manufacturers Confirm Shortage

Jim Dugan, a spokesperson of Caterpillar Inc., in Peoria, IL, confirmed in a company statement to CEG that there is “an industry-wide global shortage of off-road tires.”

“The extent of this challenge includes larger and medium-size off-road tires and is a result of capacity-constraints within the tire-manufacturing industry and the surge in customer demand for machines that use these tires,” the statement said, adding, “Caterpillar is focusing the expertise of 6 Sigma teams, our global dealer network and our global purchasing division to add new suppliers and work with current suppliers to increase capacity to support the sharp surge in demand for large and medium tires.”

Dugan told CEG, “I would say this shortage has been an issue for the last year. It’s really an industry-wide issue not unique to Caterpillar.”

He said 6 Sigma teams use a data-driven approach to improve various steps and processes throughout an organization.

“In a manufacturing process, Caterpillar and other companies use this methodology to examine all the steps that go into making a product,” Dugan explained. “You try to reduce any variability along that line in order to be more consistent and increase productivity. Our teams will look at the issue related to tires, identify what we are doing now and see what can be done to improve the situation.”

Dugan said that “there has certainly been a surge in demand [for tires] and the tire manufacturing industry is going to the wall right now, full steam ahead so to speak. Hopefully they will be able to increase capacity somewhat.”

Because Caterpillar’s quarterly report is about to be released, Dugan said he could not give specifics on increases in demand for its equipment that uses tires.

Shortage of Radials

James Mitchell, manager of marketing communications of the Construction and Forestry Division of Deere & Company, Moline, IL, also confirmed the shortage.

“Certain manufacturers, especially of radial tires on four-wheel-drive equipment, are having shortages right now,” he told CEG. “It’s affecting every manufacturer in the industry. So far this has not hurt our capability to fill orders as long as the brand of tire is not placed with the order. If the customer doesn’t specify the brand, say on a four-wheel-drive loader, we can supply the loader as scheduled, meeting our normal schedules. Demand is higher for tires from some manufacturers than from others because some brands of tires are more popular than others.”

Describing the increasing demand for construction tires, Mitchell said, “Sales of construction equipment were up 31 percent last year and are up again this year. There’s more demand especially for radials, mainly for four-wheel-drive loaders. Our orders are up, so we’re building more machines.”

Asked if the shortage has affected lead times, Mitchell replied, “Yes, especially if people specify a particular brand of tire.”

Stocking-Up for the Future

AEM’s Yaksich said, “You can read financial reports from manufacturers in our industry and obviously activity for the most part is very strong. Some reports actually reference tires as a concern. What you have is significant production and some component issues creeping in as far as demand. I’ve heard from manufacturers that they are facing a tire shortage. We’ve also heard that some contractors are putting tires in inventory. Usually, contractors don’t do this, but tires are becoming so hard to get that they’re afraid that otherwise they won’t be able to get them when they need them. They are keeping some tires in their back pocket.”

Some other equipment manufacturers said they did not wish to comment on the shortage.

“We don’t have anyone willing to talk about it,” said one. “It’s a subject we don’t want to discuss.”

Skid Steer Tires From China?

Despite the tire shortage, an ad for skid steer tires appears on the rubber.com Internet Web site under the OTR (Off the Road) Tire Manufacturers listings. Shipped from the port of Qingdao, they are described as offering “competitive price and prompt delivery” in minimum quantities of 40,000.

Another listing on the same Web site offers skid steer tires in quantities of 10,000 at a price of $44.

Also on the Internet is a Feb. 29 news release from Goodyear announcing that it has sold its North American farm tire assets, including its manufacturing plant in Freeport, IL, to Titan Tree Corp.