Tyre shortage project threat

Mining companies are changing their focus on tyres from cost to extending their working life as the lack of quality supply looms as another threat to new projects.

Perth company Otraco, a global leader in the specialised field of earthmover tyre management, has estimated that tyre production in 2005 and 2006 will be just enough to meet existing international demand - let alone provide for new operations.

“It’s hand to mouth at the moment,” Otraco’s technical manager Tony Cutler said.

“In 2007 it will be even worse when new projects come on stream.”

The global shortage of earthmover tyres is one of the main challenges facing the mining industry, and Otraco is being called on by many miners in the growing crisis.

Basil Winterbourne established Otraco in the Pilbara in 1972 and the business has grown under his ownership to have 130 staff working around the world.

Chief operating officer Steve Piscetek said staff numbers would be substantially bigger if he could find skilled staff to meet the rapidly growing demand from clients.

The scale of the tyre shortage is reflected in price hikes by resellers. For instance, a repaired second-hand tyre might sell for $60,000 when an equivalent new tyre would be listed at $50,000.

The re-sellers are also winning unexpected clients.

“A-grade clients that normally would never deal with them are now being forced to deal with them,” Mr Cutler said.

Some mining companies, for the first time ever, are now prepared to buy lesser quality tyres manufactured in Belarus and China because the market leaders, Michelin, Bridgestone and Goodyear, simply can’t meet demand.

Mining companies are also retrieving and reusing worn tyres that had previously been dumped.

Mr Cutler said clients had changed their focus over the past year, from targeting the lowest cost per kilometre to targeting extended operating life for their tyres.

A recent report by Otraco indicates the current shortage is part of a historic pattern in the earthmover tyre market. In the previous shortage in the mid 1990s, haultrucks had to be parked up on blocks at some mine sites.

Since then, manufacturers’ profit margins have been squeezed, contributing to their reluctance to invest in extra capacity.

Mr Cutler said some moves were being made to increase tyre production, but they would have limited impact.

Otraco uses its expertise to help clients, which include Rio Tinto, BHP Billiton, Brazil’s CVRD and US companies Newmont and Barrick, with tyre selection and tyre maintenance.

“There is a common misconception that earthmover tyres are just a bigger version of small tyres,” Mr Piscetek said.

The reality is that maintenance is far more demanding with earthmover tyres, he said.

Otraco also advises clients on the importance of maintaining good road conditions, which often is overlooked when companies are chasing higher production.

Training is another key area. Mr Piscetek said some sites used to spend an entire shift changing one tyre but could now do it one hour.

Training is also focused on safety.

“It’s a dangerous game, tyre fitters get killed every year,” he said.

Mr Piscetek said Otraco had consistently achieved 25 to 30 per cent cost savings in the past, in part by introducing a process of continuous improvement to its clients.

It also has tools like detailed manuals and centrally-managed online databases.

“We are the world leader in what we do, we know that,” Mr Cutler said.