Mine tyres cost more than a Mercedes

Would you rather buy a tyre for a mining truck or a Mercedes sports car? Because the latter could be cheaper.

Yesterday Bloomberg reported the massive increase in the cost for the 3.5 metre wide tyres used on Caterpillar trucks has increased to $93 500 on the spot market.

Leighton Holdings said the tyres, used on trucks that haul iron ore and coal, were up to $140 000 in 2008, and the cost is heading that way again.

According to Mercedes Australian website, a SLK-class Roadster would set you back $91 150, including on-road costs.

The increase in price is driven by the Chinese demand for Australian resources including copper, iron ore, gold and coal which is forcing companies to compete against each other for the equipment required.

Managing Director of Tyre Innovators Paul Roesler, said the industry is concerned the cost of tyres will become almost unaffordable again.

"We fear the situation will become as tight as in 2007,” he 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."

It is another way the mining boom is increasing competitiveness and costs for the resource sector.

Lincoln Crawley, Managing Director of Manpower Australia and New Zealand, a company that surveys employers and collates data about employment in different sectors, including mining, told Australian Mining the skills shortage is pushing wages and other costs up.

“When you look at the percentage the industry spends on wages as compared to other sectors, they represent only a small percentage of the overall cost,” he said.

“We will see impacts of the wage inflation appearing a lot more in mining than other sectors.”

“It can make economic sense to pay more, but it does reduce productivity and increase competition.”

Manufacturers say their order books for off-the-road tyres for the next 18 months and are warning of shortages this year.

Gervase Green from Rio Tinto told Bloomberg the mining giant was prepared.

"We have appropriate arrangements with long-term suppliers to ensure that these price movements don’t affect us,” he said.

The tyre prices are seen as an unfortunate but necessary cost for the established companies who can afford to fork out the cash for them, but is a major issue for smaller miners.

"Smaller players and mining contractors will find it difficult to meet their demand because they don’t tend to have longstanding supply contracts," said Tyre Innovators’ Roesler
 

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