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Why are ocean freight rates rising sharply?

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A shortage of shipping containers and essential equipment at Chinese ports, exacerbated by fluctuating international trading environments in the Covid pandemic, has meant inflation in international shipping rates. In November, rates for transporting containers between China and the east coast of the USA increased to $4,750 per container, 42 per cent up on July rates, according to RefinitivEikon data. The cost of shipping from China to the US west coast has increased 50 per cent to $3,878 per container. Europe’s Shanghai Container Freight Index (SCFI) spot rate index has risen sharply, with Northern Europe rates up 21 per cent and Mediterranean rates up 23 per cent, rates that have not been seen since the beginning of 2014. According to Trojan, a tyre marketing agent headquartered in Qingdao, China, shortages have worsened recently. This busy period for Chinese exports could see deficits continue to deepen into the New Year, meaning further price increases.

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Tyre importers should plan for lack of space on ships and freight increases

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Back in April, Tyres & Accessories spoke to leading supplier of freight forwarding services to the UK tyre sector, Maritime Cargo Services about the perfect storm of circumstances complicating life for tyre importers. Then it was difficult to anticipate the logistical problems the industry would face by the end of the first quarter – at least far enough ahead to sidestep the issues entirely. Even armed with the expectation of disruption, the pressure has built at British ports throughout the year, especially in the last quarter as Covid began to spike again. As a result, Honda UK’s suspension of production became a high-profile symptom of the catalogue of issues causing bottlenecking and ultimately delays in the supply chain. With the end of the Brexit transition coming amidst the second spike of Covid-19 transmissions on 31 December, T&A asked MCS again about what difficulties distribution businesses need to plan for this winter.

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  1. Coronavirus creates shipping problems for tyre importers
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Chinese tyre import share rises above 50% in declining European market

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Linglong

China accounted for more than half of all passenger car and light truck (PCLT) tyres entering the European Union and the United Kingdom for the first time during the first eight months of 2020. Comparatively, the then 28 EU nations imported 105 million passenger car and light truck (PCLT) tyres from outside the region in the same period of 2019.* The major impact on tyre demand of the coronavirus pandemic, as well as varying degrees of disrupted production, led to the EU-27 and UK together importing 21 million fewer tyres in the corresponding period of 2020, a reduction of 20 per cent. The Eurostat and HMRC data was compiled by leading data analyst Astutus Research.

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Iran’s tyre manufacturing output refocuses on heavy tyres

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MohammadAli Dahaghin; Unsplash

The tyre manufacturing output of Iranian factories increased 26 per cent in the first five months of the current Iranian calendar year (1399 and specifically the period between 20 March and 21 August 2020) compared with the same period last year. Such growth is consistent with the Iranian tyre industry’s 10-year plan to double in size by 2025, which was publicised in 2015. And it also corresponds to earlier optimism related to Iranian tyre market growth, but what do the latest figures tell us about the product mix of the Iranian national tyre production base?

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New UK Global Tariff sees tyre duty reduced from 4.5% to 4.0%

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The UK Department for International Trade has announced a new UK Global Tariff (UKGT). Announced on 19 May 2020, this replaces the EU’s Common External Tariff on 1 January 2021 at the end of the Brexit Transition Period. As it pertains to the tyre business, while there are various categories, the announcement basically means the new UKGT sees tyre duty reduced from 4.5% to 4.0%. Camel back rubber for use in retreading stays at 0%, while duties cushion industrial tyres are reduced to 2.0% from 2.5%.

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China now in 3rd place as source for EU truck tyre imports

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In previous features on commercial vehicle tyres, Tyres & Accessories has noted the varied effects European Union tariffs on product manufactured in China have had on the market. Questioning whether the tariffs have “worked” is a complex question, because their effect on new tye segmentation and retreads have been varied across Europe’s major markets. Truck tyre markets in France and Germany reacted in very different ways to the UK, at least partially because the latter market was contracting anyway.

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Brexit, the continuing saga

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We were told that 29 March was the Brexit deadline. As we go to press in the week after that deadline passed, it is clear that we don’t know either when or how we are going to Brexit. As we discussed last month, the consensus amongst analysts and the automotive industry is that there will be a massive negative impact on vehicle manufacturing (and therefore automotive suppliers) in the UK. But what else do we have to look forward to?

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TRIB testifies at US tariff hearings

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The Section 301 Committee of the Office of the US Trade Representative (USTR) is holding hearings at the US International Trade Commission as part of a consultation process ahead of proposed import duties on certain Chinese produced tyres.

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Moody’s: US auto parts tariffs credit negative for suppliers

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The US imposing tariffs on imported vehicles and auto parts would be broadly credit negative for parts manufacturers that are part of a global supply chain, Moody’s Investors Service says in a new report. Even so, the financial impact to the auto industry stemming from the proposed tariffs — contemplated at up to 25 per cent for imported vehicles and parts — will mainly depend on the extent to which auto parts suppliers’ operations are spread out through the world and their products imported back to the US.

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Emissions inspections push Chinese tyremakers to the brink

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With a headline like that, you could be forgiven for thinking that this month’s column refers to the ongoing geopolitical sabre rattling taking place between China’s North Korean neighbours and the USA. However, as important as the hint of nuclear escalation is, here we focus on how the overheating Chinese tyre market is as close as it has ever been to boiling over. Two key subjects have raised the temperature in the People’s Republic during the last month or so: The European Commission’s (EC) decision to initiate an anti-dumping investigation against Chinese-produced truck and bus tyres; and the even more imminent effects of local environmental emissions investigations within China itself, which have led to the suspension and even closure of numerous businesses in the country (see below).

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Re-globalisation of the international tyre market?

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In the last few weeks, Apollo has initiated production at its new Hungary tyre factory and launched a brand new European truck tyre range (see Company News section pages 32 – 24); Doublestar has confirmed that it is the only remaining bidder in the race for 42 per cent of Kumho Tire (see pages 36 – 37); and as we went to press, Finnish tyre maker Nokian announced that it will build its third production plant, this time in the USA. All this points to what we might call a re-globalisation trend. Rather than businesses from the large so-called developed nations expanding around the globe, this second wave of international expansion sees the roles reversing to some extent. While before the Western nations were looking to invest in fast-growing “emerging” economies, now the proverbial shoe is on the other foot and large companies in what used to be called the BRIC nations are investing in more developed tyre markets.

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Chinese imports a growing part of Korean tyre market

The Korea Tire Manufacturers Association (KTMA) reports that the total value of tyres imported into Korea reached US$511.48 million (561.6 billion won) in 2015, up 63.8 per cent from $312.27 million in 2010. Tyre imports in the first half of 2016 (January to June) also increased, growing 6.2 per cent year-on-year to $250.84 million.

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Yinbao aiming at mainland Europe post-US tyre import tariffs

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Yinbao Tyre Group, a company that has been manufacturing tyres in China for 20 years now, is aiming to grow sales in mainland Europe. The decision comes around a year after the US renewed its policy of levying import tariffs against Chinese renewed products and thus made it impossible for some Chinese tyre makers to continue to do business in the US.

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Bucking the trend: how UK retreaders like Bandvulc are navigating market storms

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In recent months we have heard much about the decline of retread demand and production at the same time that Chinese truck tyre prices have plumbed to new depths. Of course this paints a very negative picture for the retreading business in the UK – where low-costs imports have historically been more popular than the average European state – and also across the European tyre markets. The premium new tyre makers have suggested they will weather the storm by pointing out their uniquely strong position with regard to large fleet customers. Because they also produce their own retreads, these firms pointed out that their businesses will remain relatively sheltered by the low quality, oversupply problems facing other independent retreaders. However, such a reading of recent history relies on two premises: 1) that the market remains in undeniable decline and 2) that premium manufacturers with their own retreading options are best positioned to get over this particular bump in the road.

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Conditions ripe for European trade barriers?

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New year, new trends It seems a bit pessimistic to start 2016 with a reference to recession. Nevertheless, when Bank of England deputy governor Minouche Shafik suggested the UK tyre industry is in the grip of recession-based consumer behaviour at the end of 2015 she highlighted an important point. The market is encountering different purchasing […]

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