Officials ponder levying duties on Chinese tires

HILTON HEAD, S.C.—Should the International Trade Commission and the Commerce Department levy countervailing and antidumping duties against Chinese truck, bus and off-the-road tires?

From the standpoint of tire dealers, distributors and retreaders, this is a complicated question, according to speakers at the 32nd Clemson University Global Tire Industry Conference, held April 13-15 at Hilton Head.

In the question-and-answer period after her speech, Freda Pratt-Boyer, senior auditor for Purcell Tire & Rubber Co., admitted she was undecided about the question.

Chinese tire manufacturers are important suppliers to the lower end of the U.S. tire supply chain, Pratt-Boyer said. But Purcell Tire, one of the largest retreaders in the U.S., relies on a steady stream of high-quality, retreadable casings, and China is not a reliable supplier of such casings.

Also, a flood of low-priced truck and bus tires into the U.S. could do to truck tire retreading what cheap new passenger tires did decades ago to U.S. passenger retreading, according to Pratt-Boyer.

“I don't want to see the retreading industry go away, and I'm afraid this would be a step toward that,” she said. “I'm afraid that in 10 years, we won't have any truck tire retreaders left.”

Mike Wolfe, owner/operator of Southeastern Wholesale Tire and Pratt-Boyer's co-presenter at the Clemson conference, said during the Q&A period that he would like to see tariffs on Chinese truck and bus tires of 10 to 12 percent.

“That would keep tires from coming in too fast and too cheap,” Wolfe said.

But very high tariffs, such as the one the federal government levied against Chinese passenger and light truck tire imports for three years starting in 2009, would cause a flood of used tires on the market, with dealers who mostly don't inspect their goods for defects, he said.

In their presentation, Pratt-Boyer and Wolfe delivered facts from a tire distributor's standpoint about China's impact on today's U.S. tire market.

Medium commercial tire imports from China rose 68 percent between 2000-15 and are expected to grow another 30 percent by 2020, according to Pratt-Boyer.

“In 2010, China was actually producing more than 40 percent of the world's tires, with excess capacity of more than 340 million tires,” she said. “Going forward to 2020, China's production is forecasted to climb to almost 50 percent of the world's production.”

Net tire imports to the U.S. rose 47 percent between 2002-07, to 144 million from 98 million, according to Pratt-Boyer. However, imports dropped 2 percent over the next five years, to 141 million units, largely because of the federal government's antidumping actions.

Meanwhile, China's tire production has not slowed at all, with growth of better than 40 percent projected for the 2007-17 period, according to Pratt-Boyer.

“This means that the China factories not only managed to supply their own markets—which grew very rapidly over this period—but also increased exports significantly,” she said.

China has the capacity to supply more than 80 percent of global radial truck demand, Pratt-Boyer said.

China now supplies as much as 35 percent of the U.S. truck tire market, she said, largely because of attractive margins for resellers and improved quality.

“The gap between the major brand segment and Tier 3 products has narrowed,” Pratt-Boyer said. Also, original equipment manufacturers are beginning to accept Chinese-made tires, and all the top tire manufacturers have established factories in China, she said.

The U.S. has seen significant reductions in passenger and light truck tire imports thanks to countervailing and antidumping duties, Pratt-Boyer said. But some manufacturers have moved production to other countries, such as Thailand and Vietnam, to avoid duties levied against Chinese imports, she said.

“The fact is that China is here to stay, and the influx of these truck tires into the U.S. fleet market is having an effect on tire retreading,” Pratt-Boyer said. “Many of these "bargain' tires cannot be retreaded, and fleets recognize they are disposable.”

Many Chinese truck tires don't have casing warranties, which makes fleets squeamish about retreading them, she said. But many now also have approval from the SmartWay Transport Partnership, which makes them more appealing to fleets, she said.

Despite current trends from China, Pratt-Boyer proclaimed herself an optimist about the future of retreading.

“The history of retreading extends almost as long as the pneumatic tire itself,” she said. “Fleets have always been interested in extending the life of an asset.”

Wolfe said distributors are in a strange situation: passenger and light truck tires from China have duties as high as 80 percent, yet tire prices are dropping.

Lower oil and rubber prices, as well as Chinese currency manipulation, played a role in decreased prices, which are 30 percent lower than a year ago, he said.

“In 2015, we had a lot of distributors stocking up on tires, trying to beat the tariffs,” he said. This year those distributors have inventories they have to sell at a loss.

Wolfe expects the government to levy duties on truck and bus tires, but he added he has no idea how high those duties will be. The Commerce Department's preliminary determination on countervailing duties will not take place until June 27.

“Tariffs have not been good for us,” Wolfe said. “I think we're getting a lot of truck tires into this market that are unsafe.”