As the federal government considers additional duties on truck, bus, and radial (TBR) tires from China, Cooper Tire & Rubber Co. does not believe the domestic supply of tires will be enough to meet the demand for TBR tires in the U.S. in the near term.
“We are assessing the impact of the preliminary countervailing duty tariff announced on July 28 with the goal of keeping Cooper and our customers competitive,” Brad Hughes, Cooper’s chief operating officer, told investors during an Aug. 4 earnings call.
The U.S. Department of Commerce (DOC) has set countervailing duty tariffs up to 23.8% on TBR tires from China. The tariffs are designed to counter subsidies from the Chinese government. The DOC is also investigating whether TBR tires are being dumped in the U.S. at prices below manufacturing costs. A preliminary decision in the anti-dumping case is due Aug. 26.
“We believe there is not enough domestic supply to meet demand for TBR tires in the U.S. and the majority of the excess supply is in China,” Hughes said.
Hughes told investors it’s not clear how the market and pricing will be impacted. He said the TBR situation differs from last year when the federal government imposed tariffs on passenger tires from China because “there was ample supply of product outside of China to meet demand.”
Cooper is moving forward with a joint venture company in China to produce tires and is also looking for suppliers outside of China, according to Hughes.
“We are committed to and are continuing to make progress in our planned acquisition of a majority interest in GRT, a joint venture in China to produce truck and bus radial tires for global markets. We expect this transaction to close this year pending certain permits and approvals by the Chinese government. We are very pleased with the cooperation from our GRT partners and with the quality of the product that are being produced at that facility and look forward to closing this transaction," he said.
“As a reminder, when we announced GRT we noted it was just our first step in the diversification of our TBR sources," Hughes said. "We believe this investment remains prudent and we are committed to continuing to deliver high quality tires and superior value to our TBR customers. As part of that commitment, we are continuing to evaluate other options for additional TBR supply to serve global markets, including alternatives outside of China.”
The company said sales of the Roadmaster commercial truck tire brand were very strong in the second quarter of 2016 compared with the same period last year. Cooper's commercial truck tire shipments for the U.S. were up 23.7% during the second quarter.
For details on Cooper’s second quarter results, see “Cooper Tire Increases Its Profitability in 2Q.”
For MTD’s latest coverage on the DOC’s tariff investigations, see “DOC: Chinese Truck Tires Are Subject to Tariffs.”