Tight tire supply impacting rebound in mining sector

The mining tire market is enjoying continued growth in sales as the mining industry rebounds in the U.S. supported by favorable government policies.

"Overall, 2018 was a positive year for the mining industry. We saw growth in almost all segments with strong demand and low market supply in key areas," said Jake Thompson, B2B mining segment operations manager, Michelin North America.

"We anticipate continued growth through 2019 in both OE and the replacement market."

Original equipment tire demand continued to dramatically expand year-over-year, particularly in sizes for larger equipment, which was consistent with OE equipment orders, according to Shawn Rasey, director of global business development of earthmover tires for Continental Tire the Americas' commercial specialty tire division.

Likewise, the replacement tire market continued to grow in 2018 for the U.S. and Canada but by a more modest level, he said. Future replacement demand should be buoyed by the large volume of new OE mining machines that entered the market in 2017 and 2018.

The growth in OE equipment sales is a combination of scheduled replacement of mining equipment and fleets adding new equipment as they started to ramp up their capacities, he said.

"Based on market indicators, while some product shortages will persist for much of the year, we would estimate that the OE channel will still grow in 2019, but at a slower rate than the previous two years," Rasey said. "For replacement, the growth should be slightly up, with the caveat of some market niches may grow more based on improving supply."

Across the board, commodities have been in a better place over the last couple of years, but particularly in coal, Rasey said.

"We've seen, particularly in Appalachia in western Pennsylvania, really a lot of re-energized activity for both metallurgical coal as well as steam coal," he said.

Bruce Besancon, Yokohama Tire Corp.'s vice president of OTR sales, said coal mining has done extremely well over the last two to three years and surmised that pace will continue into 2019, mainly due to current federal administration policies.

"From our first indications of this year we are seeing a slight trend upwards—and, as we have stated in the past, we are very cautiously optimistic about increases (both in underground and surface mining) across the board. We are seeing significant increases in quotes and requests for our product," Besancon said.

The OTR tire market in 2018 was a good year for a lot of manufacturers, BKT USA Inc. said. North America experienced a tire shortage for large mining tires thanks to a reduction in production caused by raw material shortages. This was coupled with an increase in tire demand driven by an increase in new equipment production. Demand has risen in the past year, but sales have only slightly increased because of availability constraints, the tire maker said.

The mining industry will continue to grow as new mines open.

"Within a small Nevada area alone, six new mines are opening in late 2019 and early 2020," BKT said. "Demand will continue to grow based on the increasing need for construction raw material. The demand for ore and other precious elements will drive OEMs to build larger machines to maximize output. These new machines will require even more specialized tires to satisfy load capacities."

Tire shortages

Tire fill rates have been lagging on large mining tires, Rasey said, adding the shortage "varies from manufacturer to manufacturer, because everyone is in a slightly different position on where they are in their ramp-ups. I think some items have eased a little bit over the last six to eight months but there are certain items that seem to consistently still be an issue and 49-inch and 51-inch (rim diameter tires) fall into that category for sure."

During the past two years in the U.S. "there's been a substantially improved regulatory environment that has made it a little more beneficial for miners to reinvest and get started again. And I think that has significantly contributed to increased tire demand, that's for sure," Rasey said, noting that some mines that had been closed reopened or mines that had a limited production schedule have started to ramp up production.

"That trend, coupled with what's been happening to commodities in general, has kind of created a much more favorable business environment in mining," Rasey said.

Continental, which re-entered the OTR tire market a couple of years ago, has been focusing on the underground mining with product launches, particularly of radial tires.

He said open-pit mines have been trending toward larger equipment with tires in sizes ranging from 49- to 63-inch rim diameters.

"There's been a big investment in capacity over the last five or six years, but a lot of that capacity had been idled when the market globally went down," Rasey said. "So a lot of that idled capacity took some time to get it ramped back up to catch up to where the miners are. I think it's still not quite there.

"In our case, we kind of dramatically moved forward with our plan on some of the bigger tires … on 49-inch and 51-inch we are rapidly accelerating that up into 2019. So within the 2019 window, for us, we're fully expecting we'll be in a position to finish our market evaluations and introduce that 49-inch during 2019, and hopefully we'll even be able to be far enough along on the 51-inch market entry that we could do that as well."

Industry trends

The key issues in mining continue to be safety and productivity, Besancon said.

"New technology is helping in both of these areas," he said. "New means of monitoring both tire and truck performance are helping get more out of all the tire-related products used. The key to the future is going to be cost/hour or cost/ton – and whoever can do this most effectively will be a winner in the market.

"Yokohama launched last year newly developed 33.00R51 mining tires in several different tread compounds to meet the needs of dedicated mines," Besancon said. "We have also assembled a mining team that is going to allow us to better serve the needs of mines and related operations. Yokohama also has increased its flow of tires for the underground mines for both existing and development tires—with key dimensions for the eastern coal being launched shortly.

"In 2019, Yokohama will be coming to the market with more large haulage tires and other new developments to meet productivity demands of hard rock mines."

Customers are continuing to demand more performance out of their tires, according to Michelin's Thompson.

"They are striving to go faster and to carry heavier loads. Additionally, mining continues to push digital technology that will allow them to make smarter decisions," he said.

Thompson said Michelin is pursuing innovation in the capabilities of both tire technology and digital solutions. In 2018, Michelin launched MEMS4, which adds real-time GPS and accelerometer data to transform its current tire pressure monitoring system for OTR tires into a monitoring and reporting platform.

BKT said it has hired additional technical staff with specialized technological training to provide more hands-on help for customers regarding the company's SPOTech (Satellite Performance Optimization Technology), a monitoring system that collects data on haul truck activities by means of GPS systems, GoPro cameras and accelerometers for improving productivity.

The firm is working alongside dealer sales staff to get in front of end users, helping to promote product and increase sales.