Fifteen months after the Infrastructure Investment and Jobs Act was signed into law, shovels are ready to hit the ground. That’s great news for tire dealers who sell tires for construction, roadbuilding and other applications.
OTR tire suppliers elaborate — while providing a snapshot of last year’s OTR tire market and more — in this MTD exclusive.
MTD: What was the biggest trend that impacted the OTR tire market in 2022?
SCOTT HOLUB, manager, OTR technical services, Balkrishna Industries Ltd. (BKT): Price increases and freight surcharges had the biggest impact on the OTR tire market in 2022. Increases in raw materials, higher freight charges, the cost of restarting manufacturing plants, the availability of containers, port congestion and continuous high inflation drove the cost of OTR tires up.
The higher prices drove dealers to look for different manufacturers that were less expensive and more value-driven.
Prices seemed to stabilize in the fourth quarter of 2022. Controlling raw material costs is one way to stabilize tire costs, and at BKT, we built our own carbon black plant to lower our costs and improve quality.
With the disruption in supply chain coming out of the pandemic, supply — although much better than 2021 — was still a problem in 2022. Supply started slowly and became increasingly better as the year went on. Construction inventory was sporadic, while mining inventory was still strained.
ROB SEIBERT, president, off-the-road, Bridgestone Americas Inc.: Sustainability remains top of mind. As a company, we aim to reach carbon neutrality and the delivery of tires made from 100% renewable materials by 2050.
That focus exists in the commercial tire space, as well, including OTR. At Bridgestone, we want our products and solutions to maximize efficiency, while conserving natural resources and reducing emissions in our business operations.
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.
Tech-savvy customers are becoming a bigger part of the market, as well. Today’s customer wants innovative solutions that deliver real-time updates on every aspect of his or her operation, with safe and reliable equipment for the jobsite. They also want this in the palm of their hand.
TONY CRESTA, director of product management, CMA LLC: Availability was once again a very important factor in 2022 across all OTR segments. We have seen demand steadily increase coming out of the 2020/2021 global shutdowns.
Double Coin’s U.S. warehouses continued to support our customers, while our factory did a fantastic job of keeping up with the demands of the growing market.
MATT FUTRELLE, head of business field, earthmoving, Continental Tire the Americas LLC: The biggest trends in 2022 were keeping up with high total demand, focusing on being a reliable supplier to the original equipment manufacturers as they dealt with various supply chain struggles and finally the large fluctuations in material, energy and logistics costs.
Employee turnover and retention seem to be a big topic in North America for the industry, although fortunately, our OTR group remained quite stable.
LOIC RAVASIO, general manager, global Americas OTR business, Goodyear Tire & Rubber Co.: In 2022, there were several trends that combined to impact the OTR tire market. As an industry, we saw that production and supply both rebounded coming out of the global pandemic, but are still ramping up.
Shipping also impacted production and distribution — making waves throughout the year.
Some market challenges persist, but as a whole, the industry is dealing with external issues and finding ways to deliver for customers.
JIMMY MCDONNELL, vice president, marketing and sales, Maxam Tire North America: Supply chain challenges and associated logistical costs regarding ocean freight (have) impacted the timeline of delivery for customers, as well as availability of some products. While we try our best to leverage our relationship with ocean freight companies and vendors, this has impacted some of our pricing as the business had to adjust (to) the increased logistical costs.
DAVID SMITH, brand manager, construction, Michelin and Camso, Michelin North America Inc.: Infrastructure growth in North America proved to be so significant that it put a major strain on all global manufacturers that serve this continent.
Road work, bridge building and structure erection are at all-time highs, which in turn have created significant demand on the OTR tire market. This trend will continue throughout 2023.
STEPHEN REYNOLDS, OTR director, Triangle Tyre USA: It would be difficult to discuss trends in the market in 2022 without mentioning both COVID-19 and the supply chain. Blockages in many logistical chains eased throughout 2022.
In addition, with COVID-19 losing its status as a crisis in the U.S., the market really began to ramp up production for most minerals to catch up on lost production in 2020 and 2021. We saw steady growth in demand for OTR tires in 2022 as a result.
BRUCE BESANCON, vice president, marketing, Yokohama Off-Highway Tires America Inc.: The biggest trend impacting the 2022 OTR tire market was its volatility.
Society — and the tire industry with it — hit 2022 at a full run after two years of lockdowns and pent-up purchasing power.
A flood of orders, skyrocketing raw material and transportation prices and supply chain speed bumps added up to high prices and a lot of uncertainty. Dealers restocked — and maybe even over-stocked — and the market slowed down (during) the second half of the year.
Despite the challenges and some stressful periods, it was great to see the economy moving again and to dodge the major downturn that some economists had predicted.
If there’s one thing we’ve learned over the past three years, it’s that there is no such thing as a predictable market or normal conditions anymore. The new normal is a constant state of change, probably not as huge rises and falls, but more like choppy waves, coming at us hard and fast at six-to-12-month intervals.
We certainly saw that in 2022. In all, I think the new normal will keep manufacturers and dealers sharper and more aware of market trends than ever. I believe we’ll see steady growth in tire sales and success for tire dealers who manage their inventory skillfully and service their customers well.
CHAN PHOTHISANE, OTR national sales director, ZC Rubber America Inc.: Highway construction, infrastructure and new residential construction were on fire. OTR tire demand was strong.
MTD: Which OTR tire segment — mining or construction — has the potential for the most growth during 2023 and why?
HOLUB (BKT): Both segments have a reason to be optimistic in 2023. Although the coal industry is threatened long-term by being replaced with hydrogen, solar and windmills, it is still an important energy source, especially in Asia.
China still derives half of (its) energy from coal and India is looking to increase coal production this year. Coal demand should stay strong this year and beyond and coal prices should stay high with gas shortages and the war in Ukraine.
With inflation staying so high, gold and silver prices should continue to climb, increasing demand and mining production.
With the infrastructure bill in place, there is expected to be 5% growth in construction. Infrastructure projects should start to take off, but with high inflation expected to continue, smaller residential and commercial ventures are expected to drop. Increased government debt is crowding out private capital investments.
Overall, mining expects to have the most growth.
SEIBERT (Bridgestone): While 2022 was a dynamic year, the construction and quarry industries have been robust and we expect strong industry fundamentals to continue into 2023.
Industry measurements indicate growth in public construction and a recovery in private non-residential construction in the coming months. Signs point to growth in non-residential project planning and expectations for sales, profit, and staffing remain high for 2023. One of our key objectives in the coming year is to partner with our dealers to capitalize on this growth as a business.
We continue to see a slowdown in residential construction, primarily due to higher interest rates. Residential investment has declined for six straight months. Although we are seeing a slowdown in investment, 2022 ended with spending increased over prior year and it remains at historically high levels due to an underbuilt housing situation in the U.S.
CRESTA (CMA): While we are seeing increases across both segments, we are expecting the effects of the 2021 Infrastructure Investment and Jobs Act to continue bolster growth in the construction OTR tire segment.
FUTRELLE (Continental): We believe there will be overall growth in each of these segments and it will be an opportunity for our industry. Even if the economy slows, many construction projects have already been kicked off and funded by the various programs approved previously. In the mining segment, there is a still a lot of backlog to catch up to in the year 2023 and this business seems to remain strong.
RAVASIO (Goodyear): Let me start by saying that both the mining and construction businesses have potential and are poised for an impactful year in 2023. Based on the market trends we see impacting the OTR business, we anticipate that the mining industry has the bigger potential for growth. The need for more mineral resources globally means that the mining industry should see more opportunity for consistent growth in the year ahead.
MCDONNELL (Maxam): The construction segment — with the investments in infrastructure and contracts being awarded. We have spent the past year growing our construction segment and its solutions to keep up with the increased demands in infrastructure.
SMITH (Michelin): Fixed site and mobile site construction has the most potential for growth in 2023. With the U.S. Congress recently passing the infrastructure bill, there is plenty of fuel to push growth in this segment. We will see non-residential growth increase significantly, as it has already begun across all of the U.S.
REYNOLDS (Triangle): I think it’s pretty clear that the construction segment has the most room for growth potential in 2023. After seeing some growth for coal in both 2021 and 2022, most experts expect that market to take an 8% to 9% decrease in 2023.
Many minerals, such as copper and iron ore, are expected to hold steady or even increase somewhat in production, but most are expected to decrease in value. I don’t think the mining market will be soft, but there really aren’t any indicators for significant growth in 2023.
Construction, on the other hand, should see an increase due the infrastructure bill. It’s true that inflation has weakened the impact of funding and that in part was responsible for the slow construction starts in 2022.
There are signs, however, that as supply chains improve, prices for many construction materials are leveling off. If the infrastructure bill had not been passed and that funding was not in place for localities, the impact of inflation would have been far worse on construction projects.
I expect to see a steady mining segment and a healthy construction segment despite what is almost certainly going to be a struggling economy in 2023.
BESANCON (Yokohama): Mining is a stable platform for tire sales. In general, mining doesn’t experience big swings and I believe it’s on a steady, positive trajectory right now.
The bigger opportunity for growth in 2023 is in construction tires. The huge federal commitment to rebuild and maintain infrastructure will put a lot of people and machines to work.
Much of that work is going to be in the construction industry’s version of what transportation experts would call “the last mile.” Let’s call it “the last brick.” Billions of dollars’ worth of projects are going to be (devoted to) maintenance and improvement — not the massive earthmoving that marks projects starting from scratch, but digging, demolition, building and paving with smaller machines that can operate between buildings or on existing roads. That means a significant demand for tires in the 25-inch rim size and under.
Those smaller machines are also getting more efficient than ever, carrying more loads — and, often, heavier ones — per production hour. That represents more demand than ever on tires.
Today’s tire dealer needs to be ready and able to help construction customers select the right tire for the job and conditions, mount it quickly and manage it correctly. We’re also going to see more paving and compaction machinery out there, thanks to the road-building elements of the infrastructure law.
PHOTHISANE (ZC Rubber): The mining industry will be challenged by Environmental Social Governance. Climate change, supply chain disruption and trade restriction will impact the mining industry. As the world moves toward life powered by electricity, the demand for copper also rises. Copper will be in high demand.
The shift from coal to natural gas and renewable resources has changed the industry. Coal mining is expected to decrease over time, but coal mining should be OK in 2023. Road construction will drive up demand for gravel, rock and sand.
High interest rates, rising material costs and a labor shortage will slow down residential construction. Lumber demand has slowed down in certain regions. Overstocked mills are lowering lumber prices.
Corporate employees are working from home and meeting on Zoom. There is less need for office space today than there was yesterday. Downsizing to empty offices will be filled before new construction offices are built. We expect residential and warehouse construction to slow down in 2023.
The U.S. economy is on the rise and the dollar is stronger. Highways, rail, bridge, airports and ports will get a facelift. We expect growth in commercial, industrial, infrastructure and institutional construction. Construction tire demand will continue to be strong in 2023.
MTD: What’s your advice for OTR tire dealers in 2023?
HOLUB (BKT): With OTR inventory increasing and OTR tire pricing stabilizing, we recommend that tire dealers keep a close eye on manufacturers’ programs to maximize buying discounts. We would also encourage dealers to really partner up with manufacturers that have shared values and business goals.
Dealers should work with manufacturers to maximize new smart tire technologies. Now more than ever, dealers need to give end users that extra value. Every dealer can get tires and offer service, so dealers need to find ways to stand out.
SEIBERT (Bridgestone): We encourage dealers to focus on the construction segment this year, particularly an expected uptick in 25-inch (tire) sales. This is largely due to tailwinds from the infrastructure bill within this size range and upside in the construction segment, which accounts for the majority (of) demand in these sizes. In the end, 25-inch tire demand is expected to increase versus prior-year.
Moreover, dealers are encouraged to keep an eye on customer interest in technology and solutions that maximize efficiency. With sustainability top of mind in the industry, that should continue into 2023.
CRESTA (CMA): We have been hearing from dealers across the country that their warehouses are stuffed full with tires from all segments. Considering this trend, it’s unlikely that every OTR tire dealer has the warehouse space or current inventory on hand for their 2023 OTR tire needs.
With all that being said, tire dealers will need to begin to look at where they had limitations with their current OTR tire suppliers in 2022 — inventory availability, sizing options — and make sure they have a plan in place to fill the gaps in their supply.
FUTRELLE (Continental): Pick reliable partners that can support your business — partners who are adaptable in the event of market changes, who can bring reliable products that add value to your business and customers and who have a vision for the future in the area of digitalization.
RAVASIO (Goodyear): My advice for OTR tire dealers in 2023 is to find partners that will help build and manage their inventory properly. Close partnerships between suppliers and dealers will ensure you can manage challenges, look ahead for new opportunities and make sure you have a plan in place to get the tires you need.
In 2023, planning ahead will mean planning differently and that takes collaboration and partnership.
MCDONNELL (Maxam): Manage inventory closely and stay focused on adding value to the customers’ business by ensuring efficiency and cost reduction measures.
SMITH (Michelin): With the influx in demand for tires in North America, it is important to know your customer base and what tires can bring them the best total cost of ownership. Knowing what tires you sell — along with their features, advantages and benefits — provides a dealer a deeper relationship with their customer.
REYNOLDS (Triangle): Given the impact of inflation, it is more important than ever to provide diligent and informed services to end users. In most cases, fuel and tires are their top two costs.
As an OTR dealer and trusted adviser to your clients, it is your responsibility to make sure you are recommending the proper tires, facilitating best maintenance practices in order to maximize tire life and determining that the products you recommend are giving (customers) the best value for their money. Tackling these issues isn’t easy and often requires some investment on the dealer’s part — in the form of training for OTR sales staff or investing in a more diverse inventory.
A well-trained, knowledgeable staff and the correct products available for key, specific applications will certainly pay dividends in the long run and will separate you from your competition.
BESANCON (Yokohama): Today, data is just as important as horsepower. The operators of construction equipment and the managers of those fleets are getting a stream of data from every machine. Every time a bucket lifts and every time a needle moves on a gauge, it’s recorded and analyzed. All that information is helping maximize productivity at ground level.
Tire dealers also have access to more data than ever. And like their customers, they’ve got to put the data to work to improve efficiency and productivity.
We’ve just launched an online B2B portal for our dealers that allows them to manage their inventory better than ever before. The most successful dealers will be the ones who use information to make sure they’ve got the knowledge and the tires to support their customers. I think we’ll see demand for a wide range of tires, from the premium radial categories for long cycles to the dependable, cost-effective, bias-ply offerings for the roll-up-your-sleeves workaday applications and everything in between.
Dealers have access to more information than ever, but then again, so do their customers.
A construction maintenance supervisor can get online and figure out pretty quickly which tires are on the market and what they cost, so tire dealers have to work closely with their customers on more than price. They have to be trusted sources of information, part of the customer’s team and part of their success.
PHOTHISANE (ZC Rubber): Tire availability will play a major role in OTR tire growth. Many tire dealers are dealing with warehouse inventory overstock. Limited space has affected stocking space for OTR tires. I would encourage tire dealers to keep OTR tires in stock. You can’t sell what you don’t have.
Also stay in communication with your customers, do fleet surveys and take your customers out to lunch. A small token of appreciation can go a long way.
