EVs, renewable energy could boost mining tire sales

AKRON—The government push to increase the number of electric vehicles on the road and the shift toward renewable energy technologies are proving to be a boon for the mining industry.

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.

"It seems mining is in an upturn, and a lot of it has to do with the energy situation around the world," said Paul Hawkins, senior vice president of the aftermarket at Titan Tire Corp.

"A few years ago I think people thought that you could pretty much get out of coal and steam power production of electricity. And because of that, the demand for coal was way down and, therefore, coal mining. And coal mining is one of the largest users of equipment for mining," he said.

But with energy generation issues around the world last year, the price of coal, and thus the mining of it, increased in the U.S.

"So generally coal mining was up a lot. A lot of the things that you need to make renewable energy have to be mined," he added, noting the need for metals to make windmills or batteries, for example.

"It's going to take a tremendous amount of money, I think. In general, mining will be pretty solid for the years to come," Hawkins said.

"Mining commodity demand remained strong in 2022, and pricing for copper, coal and gold was strong throughout most of 2022," said Rob Seibert, president of the off the road segment for Bridgestone Americas Inc. "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."

He said Bridgestone expects 2023 to be another strong year for the mining market as commodity pricing continues to improve.

"After copper and gold pricing remained strong throughout most of 2022, we expect that demand to remain strong in 2023," Seibert said.

"Part of this is due to the growing shift toward electric vehicles and the role mining plays in providing necessary materials for that technology. Additionally, coal pricing and tire demand have improved as a result of geopolitical reasons, natural gas pricing and energy demand. However, production levels are below 2012-2015 levels."

"Underlying global demand remains strong, as well, which will support the production levels required to keep tire demand strong," Seibert said.

"We saw strong sales of tires in both the OE and replacement markets for underground and open-pit mining," said Bruce Besancon, vice president of marketing, Yokohama Off-Highway Tires America Inc. (YOHTA).

He said Yokohama expects "a slight uptick" in sales of mining tires in 2023. "Partly because of natural growth in the sector and partly because we have introduced some new mining tires over the past few years."

He said a "hotspot" in mining is in the sand and gravel mining sector thanks to a boost in funding for infrastructure projects.

"There is a strong need for concrete, cement, road beds and foundation support, especially because of construction and maintenance that will be funded by the federal infrastructure law," Besancon said.

After a year of multiple tire price increases, several tire manufacturers said they expect pricing to stabilize this year.

"The costs are elevated but they're not increasing, so we're at an equilibrium point," Titan's Hawkins said.

"Like most manufacturers, we found shipping to be our number one challenge in 2022, due to cost, scheduling and the availability of containers," YOHTA's Besancon said.

"Raw material prices and the cost of shipping those materials were also high. Finally, like our customers, we found ourselves having to plan carefully to ensure that we could meet our needs and get supplies in time."

He noted that shipping costs are returning to normal levels worldwide and he expects raw materials costs to moderate at least somewhat.

"Because of high raw material costs and shipping fees, we were forced to raise prices and add freight surcharges in 2022, as the other manufacturers did, just to offset our internal costs," Besancon said.

"We are keeping a close eye on our costs—and the market—and will continue to make adjustments to our pricing in line with market conditions, always with a mindset to give customers the best value possible."

Seibert noted that supply-chain issues stemmed from several areas last year, from dealing with port congestion to general labor and logistics challenges.

"We managed these headwinds thanks largely to our global manufacturing footprint. Our OTR business is supported domestically by manufacturing facilities in Aiken, S.C., and Bloomington, Ind. ... Even with global economic volatility remaining a possibility in 2023, we feel prepared for the year ahead thanks to our robust manufacturing capabilities."

Every business is carefully managing inventory and cash flow, and higher interest rates certainly make that more important than it has been in many years, according to Besancon.

"Yokohama Off-Highway Tires recently introduced an online business-to-business portal to help our customers look into our warehouse inventory in real time, order product, build containers, track shipments, and manage invoices and payments 24/7. It's part of our commitment to their success," he said.

Seibert noted that across the industry there is an emphasis on products that prioritize productivity and asset optimization.

"At Bridgestone, we respond to this demand by combining our intelligent products with integrated technologies and best-in-class service. This equips our customers with the tools needed to maximize productivity and make informed, actionable decisions."

He said Bridgestone is pairing its mining products with Bridgestone solutions like IntelliTire and iTrackII, subscription-based mining monitoring systems to help maximize the efficiency of a mine's operation.

"Prioritizing sustainability in products and solutions ultimately results in longer total wear, less unplanned downtime, and tires—or, more specifically, raw materials and resources—saved over time," Seibert said.

In this environment, a knowledgeable, full-service tire dealer is more important than ever, according to Besancon.

"Tires have become extremely specialized and technical. Tire dealers and mine maintenance supervisors are more informed and better trained than they have ever been. Their teamwork can directly impact the operation's bottom line, especially when the cost of both tires and money are high," he said.

"Learn your customers' business. Know what they run, how they operate, the distance and loads they're hauling, the surfaces they're on, the tires they need. Stock with their needs in mind. Provide advice," Besancon said.

"This year, we encourage mining dealers to pay close attention to customer interest in technology and solutions that maximize efficiency," Bridgestone's Seibert added.

"Products that reduce downtime and positively impact a mine's bottom line will remain a focal point of the market as we go forward."

Global efforts to decarbonize are driving the rollout of technologies that require the increased mining of raw materials.

"As governments focus increasingly on meeting critical materials requirements through domestic and regional supply chains, the mining sector should gain additional support for project development in the near to medium term, buoyed by high prices through 2026, compared with pre-pandemic prices," according to S&P Global Market Intelligence.

Inflationary pressures and supply-chain disruptions have led to a rise in raw material, energy and labor costs, causing a dent in miners' revenue, according to Fitch Solutions, which predicted this trend will continue in 2023.

The U.S. Inflation Reduction Act, signed in August 2022, pushed for extensive provisions on green energy taxes, alongside incentives to strengthen the U.S. supply chain for critical minerals. This provides provisional tax credits when critical minerals are produced in the U.S. and to electric vehicle purchases if battery materials were extracted or processed in the U.S.

As high production costs continue to impact margins in 2023, mining companies will focus on cutting costs and maintaining production levels as opposed to investing in new projects, Fitch predicted.

"We forecast almost all mineral and metal prices to average slightly lower in 2023, on a year-on-year average basis. The Russia-Ukraine war and China's COVID policies will continue to stoke volatility to metal prices in 2023," Fitch said.

Natural gas and coal usage is expected to remain fairly stable.

The U.S. Energy Information Administration (EIA) predicts U.S. natural gas production to increase by about 2 percent in 2023. No new U.S. LNG export facilities are planned to come online in 2023; without new facilities, U.S. LNG exports will not increase, the EIA said.

Natural gas fueled 38 percent of U.S. electricity generation in 2022, up from 37 percent in 2021, but the EIA predicts it will fall back to 36 percent in 2023.

U.S. coal production was predicted to increase by 20 million short tons (MMst) to 598 MMst in 2022 but is expected to drop to 581 MMst in 2023, the EIA said.

Coal-fired electricity generation fell to 20 percent of total power generation last year from 23 percent in 2021 and is expect to drop to 19 percent in 2023.

Growing generation from renewable sources limits growth in natural gas-fired generation, and coal's generation share declines because of the expected retirement of some coal-fired capacity, the EIA said.