Will Chinese manufacturers exploit US tariff end?
Tyrepress.com took the opportunity of Reifen China to discuss the effect on exports of the US tariff on Chinese manufactured tyres coming to an end on 26 September. While Tyrepress.com has often focussed on the introduction of EU tyre labels – which received mixed coverage amongst exhibitors in Shanghai – the effect of its introduction should be seen in the context of the US tariff’s end. The question isn’t just how Chinese manufacturers are dealing with tyre labelling restrictions, but whether they are altering export strategies based on demand created by the expiration of the three years of 35 per cent duty faced by importers of Chinese tyres in the US too.
Analysts reported in September that US wholesalers had been destocking partially in preparation for increasing shipments of products from China, for which they suggested there was considerable replacement market demand. The China Rubber Industry Association meanwhile suggested that the “double whammy” of the tariff’s end and the 1 November introduction of European tyre labelling would lead to a tough trading environment, seen alongside anti-dumping duties placed on Chinese products in growing markets such as India, Argentina, Turkey and South Africa. CRIA did predict that exports to the US, having fallen from 43 million in 2009 when the tariff was introduced, would grow considerably – from 27 million PCR-LTR tyres in 2011 to 50 million or 30 per cent of the total US import market – without specifying a timescale.
At the show, most large tyre-makers were keen to suggest that they have a Jack of all trades approach, suggesting that improved technology would deal with EU labelling, while increased capacity would help to serve increased US demand. Jinyu’s view that the US represented an opportunity, expecting to increase exports there, was reflected by most big players. Amongst smaller-sized players Techking’s Aaron Liu said that the company is “trying to find distribution chains” for a gradual increase in its activity there, while “building acceptance of the products” – a view shared by most.
One of the top three ranked Chinese manufacturers, Hangzhou Zhongce presented the most nuanced view of the situation with European and Oceania regional manager Nick Zhou suggesting that “over-crowding” was a challenge in the US for Chinese tyres as soon as the tariff ended. Having said this, a US sales and distribution operation is in the works, last mooted for Southern California, and this would help to differentiate the company from the explosion in competition there.
Import and export manager Johnson Su explained that the company’s increasing capacity, with its new Jintai and Thailand plants ramping up in 2013-14, would help the company to exploit growth markets around the world, describing South America, Africa and the Middle East as “very important”. The Thai plant is said to be a safeguard against anti-dumping measures around the world, according to chairman, Shen Jin-Rong. As for the other half of the “double whammy”, Su said the manufacturer had “stolen a march” on other companies due to early adoption of tyre labelling; the company joined the Imported Tyre Manufacturers’ Association in July, helping it to access expertise on labelling. Summing up, Su said the company was “increasing capacity for export”.