Changing trends in OTR tire market

Gary Nash of Yokohama tire corporation is interviewed about the global supply issue and other challenges within the industry

Over the years, the off-the-road (OTR) tire market has been like a roller coaster as far as supply and demand. The market was hit hard by the recession in 2009, but tire manufacturers were surprised at how quickly it came roaring back, which caused another supply shortage.

In this Q&A, Gary Nash, Yokohama Tire Corporation's vice president of OTR Sales – and a 45-year tire industry veteran – focuses on the global supply issue and other challenges within the industry, and how they will play out the rest of this year and in 2013.

Question: How has the OTR market fared so far in 2012, both globally and nationally?

Gary Nash: The market for the first half has remained extremely strong. However, we're seeing a slowdown in the second half, at the OEM level and on the replacement side. The U.S. market slowed because the eastern coal mines were down due to an unusually warm summer. Power usage dropped and the coal market was hit hard, which affected OTR tire sales.

Question: Is there still an OTR tire supply shortage?

Nash: Yes, supply remains very short for all manufacturers. We were all shocked the global market slowed down so fast in 2009 and then recovered so quickly. The market really has taken off the last three years – that's what's caused the shortage. In 2013, the OTR market is predicted to be back to the high-volume sales levels of 2008.

Question: What do you see as an industry trend in 2013?

Nash: The continued growth of X-large radial tires, 51-inch and larger. That's the fastest-growing segment in the industry.

Question: What areas of growth are there in 2013?

Nash: The housing market is the last area of OTR business that has not fully recovered. However, there is some indication that housing starts are improving, which will help in 2013. That's good news for the construction industry, which has been one of the strengths of Yokohama. We're seeing a stronger demand for scraper tires, which are used in road construction and homebuilding.

Question: You say demand is really strong, and there's still an industry-wide supply shortage. How long is the typical back-order?

Nash: Depending on the product, anywhere from nine months to a year.

Question: Are companies willing to wait?

Nash: Some companies will wait longer to get a good, high-quality product, instead of buying something that's inferior. That's what's been helping Yokohama get through the supply shortage. Our quality is extremely strong, so customers are willing to wait a little longer rather than buy from manufacturers they don't trust.

There are plenty of products available, but dealers are required to buy container loads, which they would prefer not to do. For one, the market is still uncertain and for another, they get forced to buy a lesser quality tire.

Question: When you say "lesser quality tire," what does that mean?

Nash: It means the quality has not been proven in the U.S. market. The tire may look pretty, but it might fail early. The performance may not be there, for example, in terms of how many hours it will deliver and its retreadability. When you have a proven product, you know how many hours that tire will give you based on its history. Some of these tires coming into the market today have not been proven or tested, so their track record is extremely poor.

Question: What's the status of price increases in the industry?

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