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Shortages bite but fuel price looms even larger

PLANT AT INTERMAT - In Paris last week, manufacturers stressed fuel and price pressures even as steel supply eases

THE FAMILIAR cocktail of high demand and parts shortages will continue to challenge plant customers for the next year at least, according to manufacturers at the show.

But firms warned that soaring fuel prices could prove to be the biggest headache, with oil and diesel rates cutting into margins and putting a premium on fuel-efficient technology (see story, right).

Volvo Construction Equipment chief executive Tony Helsham said: 'Oil prices show no sign of going down, and those who keep the lowest fuel consumption will have a real competitive advantage.' A number of firms reported that global demand had put their production at full stretch, with continued delays likely for some machines. Tyres for wheeled loaders, cranes and articulated dump trucks are expected to be hit hardest.

Komatsu Europe managing director Tsutomo Sakurai said the firm was building a factory for bigger machines above 50 tonnes, but that tyre shortages and demand were really biting hard.

He said: 'Articulated dump trucks are sold out for the year already, leaving customers waiting for at least six months. It is up to nine months for the biggest machines, and it probably won't resolve in the near future.' As well as these factors, some driveline components were running short because of problems with speciality steels, said Mr Helsham.

He said: 'Our industrial system is pretty much stretched. We are pushing the limits of production and we are going to have to take a decision on whether to invest in more.' He added that the firm had to be certain that demand would stay high in the medium term, particularly in North America, before taking the plunge.

He said: 'The cost of a machine has risen by 10 per cent since the shortages started and we have no option to but to pass it on. Most steel is no longer in short supply but the cost is staying high.' Case Europe European vice-president George Russell said he believed it would take 18 months to sort out the tyre supply problems.

He said: 'We are still struggling on tyres. The only good thing is that it has imposed a discipline on the industry for ordering and buying.' In response, tyre firms said new capacity was coming on stream, but would take t ime to affect supplies.

Michelin earthmover tyre president Prashant Prabhu said: 'Mining tyres from 51 to 63 inches will have increased production from early next year, but tyres from 25 to 49 inches will not come on stream until later in the year.

'This means the shortages will be felt longer by quarrying and construction than by m ining sectors.' But he added that he had seen few instances of machines standing idle for want of tyres so far.

He said: 'It is not just the tyres that are the issue, it is the whole area of manufacturers' supply. But we have been showing people how to improve tyre life by 10-20 per cent. That is a huge amount.'