Following the news that the US Department of Commerce (DoC) had set the preliminary countervailing duty for Chinese consumer tyres, market analysts have begun estimating what they think the outcome of final determinations will be when they are announced on 6 April 2015. Preliminary details of anti-dumping duties are expected in January 2015.
Writing in an investor’s note published on 25 November, Morgan Stanley analysts commented: “Considering the combined duties imposed in 2009 was 35 per cent in the first year (scaled down to 30 per cent the second year and 25 per cent in the third), we believe the final determination of the two duties could amount to a similar range.”
Their view of the possible effects of such a move is that it would “drive the bulk of low-end Chinese export tyres back to China and other regions, and would aggravate the already competitive tyre market in China.” Furthermore the analysts reiterated their view that the tyre industry’s “downward pricing trend is not over”.
As far as particular manufacturers are concerned, Morgan Stanley warned that the tariffs would be potentially negative for Hankook Tire as it is one of the market leaders. However, on the other hand, the analysts suggested “it could prove a net positive for Nexen Tire, as it has the least exposure to China and could benefit from the removal of Chinese tyres in the US, as it has some overlap with Chinese tyres.”
As far as the world’s largest tyre makers are concerned, their view is that there will be limited impact. “Michelin and Conti [are] also exposed as both import into the US – albeit Conti has more focus on premium tyres so impact will be less.”
