Long term forecast gives tyre manufacturers hope in current downturn

The consensus among tyre manufactures at Intermat is that the tyre market has moved from experiencing a considerable shortage of supply to being hit by a 'brutal' drop in demand in the space of six months.

According to Goodyear, demand in the civil engineering sector has been particularly badly hit. Overall, the company recorded tyre sales down only 5% in 2008 compared to 2007. However, this had to be qualified by the scale of the decline in sales in the first quarter of 2009, said Hubert Moquet director of the company's newly created industrial division. "The sector was down 50% compared to the same period in 2008," he said.

This discouraging analysis is shared or even exceeded by Michelin. " It's been brutal," said Luc Minguet, president of the company's Earthmover Tyre Division. "The replacement tyre market is down 60% in the first couple of months of 2009, while demand from OEMs is down 70%."

Manufacturers of premium quality products are not the only ones to be affected, however. Producers of value tyres have been similarly badly hit. "We've not seen such a big drop in the OEM market but the replacement market is down 40-60% depending on tyre size," said Victoria Ruan, European regional manager for Techking Tires.

What's more, tyre manufacturers have been hit by more than just the direct impact of the economic downturn on construction activity. The effect has been exacerbated by distributors around the world rapidly reducing the stocks of tyres they had been diligently assembling during the period of limited supply.
"The fall in our sales to the replacement market is mostly down to the de-stocking effect, while it has also had an impact on the drop in demand from manufacturers," said Minguet. "That's to say, the production rate of these OEMs has not necessarily fallen at the same rate."

The suggestion that the current surplus of supply may work against value suppliers is not necessarily accepted, however. "Two or three years ago was the perfect time to introduce Chinese Hilo products as there was limited availability of tyres from more widely recognised manufacturers," said Rudy Rizzo, customer service officer at Belgian tyre distributor Bedelco. "But we think the current crisis, even though it means the availability of alternatives has improved, might continue to encourage people to try them. People aren't confident about how things will be in the next few years, so they should still be willing try something else for themselves."

The most recent assessment of market conditions suggests this may be an accurate analysis. While Michelin and Goodyear have seen a stabilisation in the market in March, Techking's Ruan is more up beat. "Sales in March and April are up 20%," she said.

Certainly, the show saw a wide array of new launches, with the ongoing expansion of radial technology particularly noticeable. For example, Finnish tyre manufacturer Nokian's Forest Rider radial forest tyre is the first of its kind on the market.
According to Guy Sarazin, managing director of the company's French distributor Starco Nordic Pneu, the Forest Rider will be a good choice not just for forestry applications but also for tractor and trailer units where a cross-ply tyre is not sufficiently robust. "The development of such a radial tyre opens up the public works market for us," said Sarazin.

At the same time, Solideal announced its first ever foray into the market for radial tyres with the launch of its new SRGP (Solideal Radial General Purpose) range which is available in five sizes from 17.5R25 to 29.5R25.

"Our heritage has been in solid tyres and then in cross ply tyres for material handling, but for some applications radial tyres are better," explained Kurt Verbrugge, OEM sales director. "In construction environments, for example, radial tyres are often used to provide longer tyre life and for rougher applications."

Luc Minguet president of the Michelin Earthmover Tyre Division
At the other end of the spectrum, Michelin celebrated the 50th anniversary of the production of its first radial tyre for the earthmoving sector with the launch of its new XHA2 range. "We sold more than 1.5m of its predecessor, the XHA, and we hope the new range does as well," said Minguet.

Even though current market conditions are not favourable, he maintained the longer term outlook was still positive. "For half of the world's population there is an inevitable process of development which will drive the extractive and mining industries as well as infrastructure development," he said.