US Retread Industry Faces Tough Obstacles

by Marvin Bozarth

Like many businesses throughout the world, the U.S. tyre retread and repair industry is facing the necessity of having to make major changes in how it does business. In normal times (if there is such a thing!), retreaders have to be aware of changes in the market place and be prepared to make timely changes to stay competitive and profitable.

In early 2002 and again in 2006, a shortage of new OTR tyres, coupled with a boom in mining and construction in the U.S. and throughout the world saw OTR retreaders reach unheard-of production and profits. The new tyre shortage created a demand for both bias and radial OTR retreads in sizes that had generated little interest in the past. Larger OTR retreaders made major investments in autoclaves, buffers, builders, and moulds. These investments not only allowed them to increase production; it also gave them the ability to retread and repair 49, 51, 57 and 63-inch tyres that had been in limited demand in the past.

While the mining business continues to grow, the construction industry started a major decline in late 2007, and this has continued into 2008. The drop in construction will cause many OTR retreaders to experience a 10% drop in business from the record sales of 2006 and 2007.

Truck retreaders are facing declining sales due to the slowdown in the construction industry and the continuous escalation of petrol prices. A few retreaders are reporting their sales are off from 5% to 10%. There is speculation that the drop in sales of new trucks will create a demand for more replacement tyres and the high cost of petrol will encourage fleets to buy more retreads for replacement tyres rather than new tyres.

Many retreaders are putting much more effort in helping fleets set up programs to help offset the high cost of petrol with low rolling resistance compounds and tread designs. Some retreaders have said that, in some cases, with the right combination of tyres, equipment designs, and driver training, they are able to generate enough petrol savings to pay for the tyres. Many American truck fleets are cutting the speeds of their trucks to 55 M.P.H. (88.5 Km/H) and placing more emphasis on driver training. Retreaders that operate their own trucks have been forced to make major changes in the operation of their fleets by cancelling some routes and consolidating other routes. Rubber and raw material prices have continued to rise sharply, with many retreaders seeing price increases of up to $.30 (U.S.) per pound in the last six months. A few retreaders said they have been cautioned that there may be shortages of rubber in the future, as well as continued price hikes.

People are starting to ask if high petrol prices will bring about a revival of passenger retreading. Passenger retreading is still very viable, if everything is done properly. The major problem is that successfully producing large volumes of quality passenger tyres takes such a large investment that few companies would be willing to take the risk.

While "green" issues and products are big throughout the world (including the U.S.), and a potential $8 to $10 (U.S.) a gallon for petrol is going to change a lot of things, it is unclear that passenger retreading could experience a renaissance. There are currently an estimated 860 retread plants in the U.S.; less than 20 of these produce passenger retreads. While it is hard to predict what the future will hold for the U.S. retread industry, retreaders are good at adapting to change. And, one thing is certain - there will definitely be a lot of changes in the next twelve months.

Issue 2008/3