1. Import duties on tires from China
For those involved in the commercial tire business — both new and retreaded — the imposition of import duties on truck and bus tires from China was the overriding issue of 2019.
D-Day for this sector was Feb. 15, when the U.S. Department of Commerce handed down final countervailing and antidumping duty orders on truck/bus tires from China, two weeks after the International Trade Commission (ITC) reversed its original determination on the issue.
- This story appears in the Jan. 6 print edition of Tire Business.
The duties — ranging from 20.98% to 63.34% countervailing and 9% to 22.57% antidumping — were in response to a petition filed in January 2016 by the United Steelworkers union, which was seeking relief from what it claimed were grossly underpriced truck and bus tire imports from China.
The ITC issued a negative determination on that petition in February 2017, prompting the USW to file a complaint with the Court of International Trade (CIT), seeking judicial review of its original petition.
That review took nearly two years before the CIT ruled in the USW's favor in November 2018 and remanded the case to the ITC, which then reversed its decision from 2016 — voting 3-2 to find material injury against the domestic tire industry because of government-subsidized truck and bus tire imports from China sold in the U.S. at less than fair value — and announcing Jan. 30 its intention to levy duties.
At about the same time as the CIT's ruling in late 2018, the Trump administration went public with plans to impose elevated tariffs of at least 15% on a wide range of products — including tires, tubes, etc. — prompting importers of truck/bus tires from China to accelerate the shipment of tires from China to stockpile products in the U.S. that wouldn't be subject to the duties.
While the administration eventually postponed instituting those tariffs, the moves by the tire importers proved providential when the Department of Commerce handed down in February its decision to impose countervailing and antidumping duty orders on truck and bus tires from China, sources said.
Truck tire imports from China in 2018 soared 42.1% over 2017 — or roughly 2.5 million units — to 9.22 million units. This surplus inventory of these "tariff-beater" imports on hand helped the industry stave off, for several months at least, shortfalls in new imports.
By mid-2019, imports of truck/bus tires from China had slowed to the point that the full-year total was expected to fall over 60% to about 4 million units, the lowest total since 2010-11.
Despite the decline, China is expected to retain its status as the No. 1 source of imported truck/bus tires, although Thailand will be a close No. 2 and likely No. 1 in 2020, considering the number of new tire plants opened there in the past couple of years or are under construction.
In terms of filling the void with domestic production, there's been only one serious move by the manufacturing community to boost capacity in the U.S. — Continental A.G.'s $1.4 billion commitment for a truck/bus tire plant in Hinds County, Miss.
Production there isn't scheduled to begin until early 2020, however, and first-phase capacity of 750,000 units/year isn't expected until later.
At the same time, Yokohama Rubber Co. Ltd. was forced to scale back production expectations for its U.S. truck tire factory in West Point, Miss., due to a combination of facility- and personnel-related issues.
The company, which opened the $300 million plant in 2015 with a nameplate capacity of 1 million truck tires a year, rescaled the plant's production target by 2021 to 843,000 tires.
One segment of the industry that welcomed the increased import duties was the retreading community, which has complained for the past few years about the detrimental effect low-priced new imported tires has on retreading.
According to Retread Instead — the U.S. retreading advocacy group — the imposition of the new duties "will fundamentally change the supply side of new tires in the U.S. and over the next two years" and hasten a return to an improved ratio of retreads to new tires sold and put into service in the U.S.
Because of tariffs, the group said, there is more opportunity to grow than there has been in years.
"We are encouraging retreaders to 'get back to the basics' and promote total tire management programs to fleets by conducting fleet inspections, out-of-service tire analysis and recommending good solid tire management policies for fleets that includes managing total tire life to receive maximum benefits," the organization said early in the year.
With the tariffs in place, the retreading industry also hopes to see increased supplies of better quality truck tires that will be more repairable and retreadable, delivering lower total life-cycle cost and reducing the negative impact on the environment.
Early in the year, many industry observers were predicting tire shortages, price increases or both.
Bridgestone Americas Tire Operations was among the first to react, raising raise prices on all Dayton-brand truck and bus radial tires sold in the U.S. by 20%, effective March 5. This followed by six months a 10% increase on Dayton truck and bus tires sold in the U.S. and Canada.
Bridgestone said in February the price change was in response to increased business costs and other market dynamics. Bridgestone sources most of the Dayton-brand product from China.
Toyo Tire U.S.A. Corp. — which sources many of its medium truck tires from a plant in China — raised prices on its commercial tire range twice in 2019, on May 1 by an average of 5% and on Jan. 1 by 2%. In both cases it exempted the Toyo M320 on-/off-road tire, which is produced in Japan.
Cooper Tire & Rubber Co. raised prices at the start of the second quarter on its Cooper- and Roadmaster-brand truck tires — which are sourced from China — by an undisclosed amount to compensate for the elevated import duties levied by the U.S. government on truck tires from China.
On the consumer side of the ledger, elevated import and antidumping duties imposed in 2015 — ranging up to 100% in some cases — are still in effect in addition to the more recent Trump administration tariffs.
As a result, imports of passenger tires from China into the U.S. dropped more than 80% from 2014 to 2018, to 8.5 million units last year from 50.4 million in 2014.
They're expected to drop again in 2019 by perhaps as much as 60% to fewer than 4 million units, according to import/export data for the January-July period.