Inco may not meet forecast on tire shortage
Wednesday, March 8 2006 - 01:31 AM WIB
International Nickel, which wants to maintain output in 2006 at ?167 million, may not reach that target should it be unable to get tires new suppliers, Sri Kuncoro, the company?s director of corporate external relations, said.
Rio Tinto Group, the world?s third-largest miner, said Feb. 3 the global shortage of truck tires may last another two years as miners compete to expand capacity to meet rising demand from China. The scarcity, which has forced miners to look as far away as Eastern Europe for tires, may limit Indonesian companies ability to benefit from rising nickel prices.
?The tire shortage is still going On,? said Tjandrawati Waas, corporate secretary for PT United Tractors, which supplies heavy equipment for miners. ?We can find replacement tires, for example from Belarus, but these are military tires that have a shorter lifespan. That means production can be affected.?
International Nickel?s shares rose as much as Rp 1,000, or 5.7 percent, to Rp 18,700 on the Jakarta Stock Exchange after Merrill Lynch & Co. raised its 2006 and 2007 net earnings forecast on higher nickel price predictions. The shares were trading at Rp 18,500 at 1:24 p.m. local time.
Indonesian miners are both benefiting from higher prices and hurting from higher costs. January exports by mining companies almost doubled to US$857.8 million from $439.7 million, the nation Central Statistics Bureau said March 1, lifting export growth above a median forecast in a Bloomberg survey.
International Nickel previously sourced all its tire from Singapore produce Stamford Tyres Corp. The nickel miners said Feb 16 it produced a record of ?168 million of nickel matte in 2005.
?We need to diversify if we are to maintain the pace,? Sri Kuncoro said March 3 by telephone of the need for more tires. ?The rubber cost and lack of tires are out of our control. What we can do is maintain the roads better to reduce wear and tear.?
Merrill raised its nickel forecasts by 12 percent for 2006 on March 1 to $6.70 a pound, and by 15 percent to $6.35 a pound for 2007. Nickel for delivery in three months has risen 12 percent on the London Metal Exchange so far this year.
The price of natural rubber traded in Tokyo has risen 78 percent in the past 12 months to 250.8 per kilogram. It touched a high of 93 cents a pound in mid-February, Richard Kramer the chief financial officer at Goodyear Tire & Rubber Co., the world?s third-biggest tiremaker, said last month. Tokyo-based Bridgestone Corp. is the world?s second-largest tiremaker.
It?s not just Indonesian nickel producers that are short of tires, PT Bumi Resources, Indonesia?s largest coal exporter, said it has turned to Eastern Europe to supply tires.
?Where we used to buy from Bridgestone, Goodyear, we are seeking new sources, as far as Ukraine,? said Peter Tabalujan, Bumi?s head of investor relations, by telephone on March 3. ?We?re also using second?hand and refurbished tires.?
Bumi, which operates two coal mines on Indonesian Borneo, said in July its fleet of 372 mining trucks was running out of spare tires.
To be sure, not all Indonesian miners have been affected. Sales of trucks that use smaller tires have increased, said PT Komatsu Indonesia, a unit of Japan?s Komatsu Ltd. which makes heavy equipment, some used for mining, last month.
PT Tambang Batubara Bukit Asam, a government linked coal miner, uses smaller equipment where tire shortages don?t yet exist and also relies on contractors to reduce tire supply concerns, corporate secretary Milawarma said by telephone in Jakarta March 6.
?Because most of our equipment is smaller, we don?t have problems,? he said.
Even so, there?s no running away from higher costs, he said. Contractors? services as a share of total costs rose from 30 percent in 2004, to 38 percent in 2005 and will rise to 40 percent this year, he said. (*)