Facing High Anti-dumping Duties in the U.S.
South Korean tire manufacturers are facing a triple whammy of rising raw material prices, rising logistics costs and high anti-dumping duties in the United States.
On June 23, the United States International Trade Commission drew a conclusion that passenger car and light truck tires imported from South Korea, Taiwan and Thailand and light truck tires imported from Vietnam are adversely affecting the U.S. tire industry. In this context, the United States Department of Commerce is likely to impose an anti-dumping duty of 27.05 percent on Hankook Tire, 21.74 percent on Kumho Tire, and 14.72 percent on Nexen Tire.
The three manufacturers’ exports to North America account for 42 percent of their total exports. In 2020, their original equipment tire exports to North America added up to US$1,170.69 million.
Hankook Tire’s annual tariff burden is estimated to increase to 100 billion won. Besides, the company is halting the operation of manufacturing facilities due to a shortage of ships. The operation was stopped on June 10 to 12 and is scheduled to be stopped from June 24 to 26. The resultant production setback is estimated at 100,000 to 150,000 units a day.
The price of natural rubber, which accounts for approximately 30 percent of tire manufacturing costs, is unstable these days. The futures price at the Tokyo Commodity Exchange was 238.3 yen per kilogram on June 24, up 68 percent from a year ago.
In the meantime, the Shanghai Containerized Freight Index hit an all-time high of 3,748.36 on June 18. Under the circumstances, the manufacturers are considering reducing their domestic production volumes. Hankook Tire is going to adjust its facilities in the second half in order to double its annual production in Tennessee to 11 million units. It is going to increase its production in Indonesia and Hungary as well.
Kumho Tire is planning to expand its plant in Vietnam in order to reduce its domestic production. The U.S. countervailing duty is 7 percent in Vietnam and the labor cost is also relatively lower in that country. In addition, the company is considering expanding its plant in Georgia, USA, whose current annual production capacity is four million units.
The companies are responding to the situation by marking up the prices of their products. Hankook and Kumho raised the prices by 5 percent or so in the United States last month. The prices in Europe are scheduled to be raised by 3 percent to 5 percent next month. Hankook is planning on an additional 7 percent markup in the United States in August. Nexen raised its product prices by 3 percent to 8 percent in April and May.