Saturday, November 7, 2009

Freight Trucks World Wide Roll On Chinese Tyres - sorry Tires

US Ban Demonstrates the Threat to Industry and Free Trade
Shipping News Feature

US – CHINA – INDIA – UK – China is rapidly becoming the tyre supplier to the world. The ban this week by President Obama’s administration on “tubular goods” just two weeks before he visits China shows the serious nature of trade relations between the two. In the usual tit for tat exchanges over past months we have witnessed anti dumping and anti subsidy cases put before the World Trade organisation for an exotic range from auto and chicken parts from the US to China and audiovisuals and printed matter in the opposite direction.

What concerns the freight and trucking industry however is what is happening in the tyre trade. China is the world’s single biggest consumer of rubber by far. Analysts estimate the country will import around six and a half million tonnes this year alone and much of that will go to supply the Chinese tyre (tire to our US readers) manufacturers. China consumes more than 15% of the world’s natural rubber, so much in fact that Asian neighbours like Malaysia, Indonesia and Thailand are changing their economies quite radically to maintain supplies. By producing compound rubber, 99% natural rubber plus additives, they are able to benefit from a 15% Chinese import duty discount.

This huge rise in tyre output has naturally worried countries like the US who, on the anniversary of 9/11 this year imposed a 35% duty hike (reducing to 25% over three years) on passenger car and light truck tyres, meeting with scathing criticism from the Chinese and immediate retaliation. At this stage large truck tyres are immune, but for how much longer? Last week the US Tire Industry Association (TIA) passed resolutions at its 2009 annual meeting in Las Vegas calling for the repeal of the recently imposed tariffs and for more efforts to get proposed federal tyre fuel efficiency legislation ratified.

In India the government imposed import restrictions last November only allowing the actual consumers of tyres to import them. After strong protests this ban was changed in May to allow wholesalers to again stock imports and the turnover of Chinese truck and bus tyres rose from 9000 in March to over 100,000 in August with a steady growth curve. The UK is concerned that the glut of product available in China will be dumped on the home market to the detriment of European producers. In addition the trade is troubled that the tendency toward commercial truck tyre retreading, which always sees increased activity in hard times, will result in accidents caused by inferior grade casings. In the US government vehicles must have a percentage of retread tyres fitted and UK industry experts say that the quality of Chinese tyres is liable to rise, increasing costs and reducing both the retreading and over supply problems.

One thing is certain, so long as the Chinese can continue to churn out vast quantities of road legal, cheap tyres, the countries of the world will continue to soak them up. Truck operators have to work very hard to assess the value of a particular brand, cost against mileage, whether a tyre is more fuel efficient etc. so the primary concern for many hard pressed drayage companies and general hauliers will always be the initial purchase price with quality coming in a distant second.