US anti-dumping duties add to Korean tire makers' woes

The US trade body’s approval of anti-dumping tariffs on tire imports from South Korea, Taiwan and Thailand is adding to the woes of Korea’s three major tire makers, already reeling from rising rubber prices and higher freight rates.

The International Trade Commission (ITC) said on Wednesday that US manufacturers are “materially injured” by imports of passenger vehicle and light truck tires from the three countries. The ITC also said subsidized tires from Vietnam are sold in the US at less than fair value, hurting US competitors.

The US Department of Commerce, as a result, will issue anti-dumping tariffs on imports of these products from Korea, Taiwan and Thailand and a countervailing duty on imports from Vietnam, according to the ITC.

The final decision comes about a month after the commerce department said it will levy punitive tariffs of between 14.72% and 27.05% on tire imports from the four countries.

For Korean companies, the US government will impose a 27.05% tariff on Hankook Tire & Technology Co., 21.74% on Kumho Tire Co. and 14.72% on Nexen Tire Co.

In May 2020, the United Steelworkers representing US tire manufacturers filed a petition with the US government, claiming that tires imported from the countries were selling below cost.

LARGEST OVERSEAS MARKET

The US is the three Korean tire makers’ largest market, accounting for a combined 42% of their exports. Last year, the trio shipped $1.17 billion in new tires to the North American market.

According to industry officials, the anti-dumping duties would incur an additional 100 billion won ($90 million) in annual costs for Hankook Tire, which runs a factory with an annual production capacity of 5.5 million tires in Clarksville, Tennessee.

Last week, Tennessee mayors and other US politicians urged the ITC to avoid hurting Hankook Tire’s operations, saying any additional tariffs could discourage the Korean company from further investment and job creation in the state.

Earlier this year, Hankook Tire announced plans to invest 100 billion won to ramp up its Tennessee factory by the end of 2023.

TRIPLE WHAMMY

The imposition of anti-dumping duties comes at a time when Korean tire makers face higher seaborne freight rates and rising prices of natural rubber that account for between 20% and 30% of the total tire production costs.

Since the start of this year, countries around the world have begun lifting COVID-19 lockdowns, driving a speedy recovery in export freight volumes despite transportation shortages, bringing on a freight crunch.

With the resumption of business activities, global shipping costs have soared, sending the Shanghai Containerized Freight Index (SCFI) to a fresh all-time high of 3,748.36 on June 18.

Hankook Tire, which halted its two main plants in Korea on June 10-12, plans to suspend work for three more days this week as it struggles to find container ships.

Natural rubber prices have also been rising from the end of 2020 owing to tight supply and rising demand, compelling tire makers to raise tire prices.

Osaka Exchange’s rubber contract for November delivery, a benchmark for global rubber trading, finished 24 yen, or 1% higher at 234.1 yen per kilogram on Thursday, representing an increase of more than 60% from a year ago.

Hankook Tire and Kumho Tire plan to raise the price of replacement tires sold in Germany by 3-5% in July.

The price hikes by the two largest Korean tire manufacturers follow similar moves earlier this year, when they raised tire prices in Korea and the US by a single digit.

Nexen, Korea’s third-largest tire maker, already raised prices in Korea, the US and Europe by 3-8% over the past couple of months.

TO RAISE OUTPUT AT OVERSEAS PLANTS

To counter the heavier US tariffs on its tire goods, Hankook Tire plans to raise production at its overseas plants, including the US, Indonesia and Poland.

Kumho, meanwhile, plans to ramp up facilities in Vietnam, where tariffs on exports to the US are lower compared to US shipments from Korea.

It is also considering expanding output at its US factory to 4.5 million tires a year from the current 4 million units.

Nexen, which exports to the US mainly from its Korean facilities, plans to file petitions to the ITC again for a review.

Write to Hyung-Kyu Kim at khk@hankyung.com
In-Soo Nam edited this article.