Chinese imports distort U.S. shipment trends — Goodyear's Kramer

AKRON (Oct. 30, 2014) — The specter of elevated tariffs on consumer tires from China starting next year already is distorting the normal supply-and-demand relationship in the U.S. aftermarket as distributors have started stepping up their orders from China, Goodyear Chairman Rich Kramer told analysts Oct. 29 during a conference call.

As a result of what Mr. Kramer called “an unprecedented wave of speculative buying,” many distributors have purchased a “considerable portion” of their 2015 budget this year “and now have stockpiles of low-end tires to sell.”

Mr. Kramer attributed at least some of this accelerated buying to the possibility of the tariffs being made retroactive to October of this year.

“To get ahead of the impacts of the potential tariffs,” he said, “dealers and distributors increased their purchases of Chinese tires in multiples of their normal purchase volumes and made significant investments to build inventory.”

As support for his contention, Mr. Kramer cited Rubber Manufacturers Association data showing that a 3-percent increase in industry tire shipments in the third quarter was driven by a 25-percent jump in imports from China.

“To get ahead of the impacts of the potential tariffs, dealers and distributors increased their purchases of Chinese tires in multiples of their normal purchase volumes and made significant investments to build inventory.” — Goodyear Chairman Rich Kramer

“When adjusted for those imports, we estimate that the industry demand for other tires would have declined about 4 percent in the quarter,” he said.

Mr. Kramer explained the anomaly in part to provide context for Goodyear's 4-percent drop in North American shipments.

He said the pre-buy activity ahead of tariffs being considered now — which won't occur until mid-2015 — is more significant than that which occurred ahead of the elevated tariffs that were implemented in September 2009.