The tight tire market for massive trucks has challenged the mining industry for two years, making companies desperate to dig deeper, quicker and more efficiently. Giant tires are in increasingly short supply as the extraction industry hits overdrive to chase rising commodities prices.

These tires aren’t any like you’d see on the road. The largest stand 15 ft. tall, wheels are 12 ft. in diameter and weigh 7,500 lbs. And manufacturers sell them for as much as $40,000 each.

Giant tires are in increasingly short supply as the extraction industry hits overdrive to chase rising commodities prices. The increasing demand for natural resources by emerging countries has caused a global shortage of large OTR (off the road) mining tires, according to Ken Johnson, president of Amerityre, a maker of these enormous tires.

The tight tire market for massive trucks has challenged the mining industry for two years, making companies desperate to dig deeper, quicker and more efficiently. As such, these mining companies are stocking up on the world’s biggest trucks — 40-plus-ft. tall — and squeezing out every last mile from their old vehicles. And as demand for raw materials grows in the booming economies of India and China, some companies are forced to curtail mine expansions and are helping to keep commodity prices high.

Unlike tires for automobiles, those for large mining trucks are labor intensive: tires for a Chevy can be “cured” in as little as 15 min., for example; the process takes as long as 12 hrs. for an earthmoving truck’s tires, a TIME magazine article said this month. The big manufacturers — Goodyear, Michelin and Bridgestone — lack the production capacity to meet the rising demand.

For their part, tire makers say they are increasing output, The Wall Street Journal recently reported. But that takes time. France’s Michelin SA, for instance, is building an addition to its plant in Lexington, S.C., for its largest surface-mining tires to increase its global output by 25 percent. It takes up to two years to build a new factory, which among other things requires massive concrete foundations to hold enormous tire-making machines. In addition, the company is constructing a new plant for smaller mining tires in Brazil. But those additional tires will only start coming to market next year.

With a bottleneck created in the supply chain by the tire shortage, there is no incentive for earthmoving-equipment makers to expand. Limited availability of a critical component — such as tires — allows companies to keep prices high and its order book full for an extended time-period. Terex Corp., for one, can’t get enough huge tires for its mining and other big earthmoving equipment. It can’t expand capacity, and neither can any of its competitors that make mining and heavy-construction equipment and have benefited from the global surge in mining and industrial production.

Such bottlenecks in the supply chain have contributed to higher costs for a wide range of basic materials essential to manufacturers and consumers alike. Some in the industry say those higher costs can put a break on industries that might otherwise overbuild. And with growing nations such as China showing little sign of slowing demand growth for the world’s commodities, companies looking to expand can’t risk adding capacity that could prove costly to operate. Others say these kinds of “controlled bottlenecks” are exactly what suppliers use to keep capacity just below demand.

The world’s three largest heavy-equipment producers in terms of sales — Komatsu Ltd., Caterpillar Inc. and Terex — despite the tire shortage, have been posting growing sales.

For now, the major manufacturers have long-term contracts with their biggest customers, so those orders will be met first, which means there isn’t enough capacity remaining to supply smaller or newer mining operations.

So, many mine operators are scouring the Internet to find tires overseas, often buying second-rate alternatives from Belarus, Ukraine or elsewhere. Many of those are bias-ply tires rather than radials; radials generally last 5,000-7,000 hrs., while bias tires may last only a third as long and are more likely to blow under stress. “People have told us to put our tires on eBay,” Prashant Prabhu, worldwide president of Michelin’s earthmover-tire business, told TIME.

Yet for mining companies desperate to keep million-dollar machines in use, a second-rate tire is better than no tire. “There have been reports of mining equipment sitting idle, without tires,” Ken Johnsen, president of Amerityre, recently told Purchasing magazine.

So what are mine operators doing to combat the reported tire shortage? Increasingly, they are trying to extend tire life by smoothing mine roads, reducing payloads and lowering speeds. When tires get damaged, they’re repaired more often than they used to be, which in turn is increasingly benefiting tire-repair outfits.

Considering the tires’ value and the current frenzy for them, one factor of little concern for operators is the worry of theft…given the 7,500-lb. weight of the chunk of black rubber.

Resources

Wheels of Gold
by Jeremy Caplan
TIME, Sept. 3, 2006

Tight Supply Chain Is Good News for Terex
by Timothy Aeppel
The Wall Street Journal, Aug. 28, 2006

Large mining tires coming from China
by Tom Stundza
Purchasing, Aug. 23, 2006