Supply and demand remains pivotal for mining tyre prices
An article first published by Bloomberg on June 29 and subsequently reprinted in a number of newspapers around the world has thrown the spotlight on the effect demand for commodities from China and other emerging markets is having on the price of mining tyres. The Bloomberg journalist, Elisabeth Behrmann, compares the price for “tyres about 3.5 metres (11 feet) across,” such as those fitted to Caterpillar trucks employed in for iron ore and coal haulage, are fetching around US$100,000 on the spot market. Behrmann’s figures come from Australian contract miner Leighton Holdings, who works projects for mining majors such as BHP Billiton and Rio Tinto; in reporting the current spot price, she notes it lies above the US price for a Porsche 911 Carrera S or a condominium in Miami. UK buyers, it must be said, have to shell out around 33 per cent more for this particular Porsche model than their American counterparts. But you get the idea.
Admittedly, this six-figure sum is the top end of the price bracket. Speaking from Perth, Western Australia, where the company commenced retreading operations in January 2010, Rösler Tyre Innovators managing partner Paul Rösler told Behrmann that contract prices for OTR tyres were in the vicinity of $30,000. Yet price rises remain an ever-present threat: We fear the situation will become as tight as in 2007,” Rösler said. “We see tight tyre supply and high prices become a challenge for mining companies again but we think that the large players have prepared for this and have better contracts with suppliers and have improved stock.”
Problems arise for mining operators when for one reason or another they are unable to utilise their usual tyre sources. Christian Sealey, a Sydney-based spokesman for Leighton Holdings, shared with the Bloomberg journalist that “where we need to expand rapidly or where we have a new project, then we have to source tyres on the spot market like everyone else. In those situations we’re finding some inflation.”
Sources Behrmann spoke to, such as Royal Bank of Scotland analyst Lyndon Fagan, who reports hearing “comments there’ll be a wait for tyres,” share an outlook with those Tyres & Accessories has spoken with. Michelin’s Jock Aitken told T&A he expects demand for original equipment OTR tyres to be “huge”, with shortages remaining within the sector over the next three to four years. Bridgestone UK’s OTR sector product manager Barry Coleman shared with T&A that demand within the mining sector is very strong at present and “Bridgestone is producing at full capacity in terms of tyre supply on a global level and our supply across the whole EM product line is only limited by the number of tyres we can produce.” This is a condition, he added, that is shared by all major competitors.
Expectations of growing demand for OTR tyres from OEM customers have been fuelled by news of major mining sector expansion, such as the February 2011 announcement from mining giant BHP Billiton that it would make “significant investment in organic growth that is expected to exceed US$80 billion over the five years to the end of the 2015 financial year.” In announcing this investment, BHP Billiton noted that most projects facilitating this growth, including those in iron ore and metallurgical coal, were at an advanced stage of the approvals process; additional machinery to work these projects has most likely already been ordered. Rio Tinto has also announced expansion plans over a similar timeframe, again to meet strong demand from China and India.
The oft-predicted end to the current mining tyre shortage still lies at some vague point in the future. While we have moved on from the dark times of last decade when mine operators such as de Beers were forced to take delivery of new giant dump trucks minus their tyres, the previously anticipated salvation in the form of advances in OTR radial manufacture at Chinese manufacturers has yet to materialise to a game-changing extent. The future development of supply and demand in the mining tyre sector remains, as it has for more than five years now, a source of much speculation.