SRNA Expects Market Rebound Coming in Next 6 Months

Sumitomo Rubber North America (SRNA) hosted its latest COVID-19 dealer forum Aug. 20, updating dealers on the current economic state of the tire industry and its business in light of the pandemic, potential tariffs, the state of SRNA’s business and overall market conditions.

Rick Brennan, SRNA’s vice president of strategic planning, said replacement tire industry volumes through the first half of August were mostly down (-10% for passenger car tires; -8% for light vehicle tires; -3% for TBR tires and+3% for light truck tires), citing data from the U.S. Tire Manufacturers Association.

“What we think has happened in August is a lot of the inventory that was built up in April and May was sold out in June and July as the industry rebounded,” Brennan said. “We see the order rates, at least for us, are actually increasing from the June/July number, but we can’t fill those orders as fast as we could before. We’re basically unloading a container, moving it around the corner and sending it back to all of you.”

When projecting overall replacement unit volumes for the year, Brennan said he expects the market to have an opportunity to rebound during the second half of the year.

In Canada, Brennan commented that “passenger and light truck [tires] have rebounded quite well for July,” as those numbers reflected -34.9% to 5.8% m/m and -37.6% to -3.3% m/m, respectively.

“In the second half, things will be better,” Brennan said about Canada’s data. “[Industry volume] will be down 7.8% in the second half, so a pretty good rebound for our friends up north.”

Tariff Timeline

Matt Leeper, SRNA’s director of sales, consumer, said that the company, like many others in the industry, is waiting until late December or early January, when the U.S. International Trade Commission (ITC) is expected to declare tariff determinations in relation to its PLT tire tariff investigation. Leeper shared the following timeline on progress:

On May 13, the USW filed for tariffs on consumer tires: 195% for Korea, 147% for Taiwan, 217% for Thailand and 33% for Vietnam.
On June 22, an initial decision to proceed was issued by the ITC.
On July 17, the ITC made the unanimous vote to proceed.
Aug. 18 is the earliest date for the collection of AD duties under a critical circumstance finding.
Jan. 5 is the extended date for a final DOC decision (this would be the likely date the tariff would be implemented, and AD duties would be collected).

“It is really a critical time for overseas manufacturers,” Leeper said. “We’re hoping for as small of a tariff as possible.”

Consumer Business

Leeper said year-to-date SRNA’s consumer tire business is “basically flat” at +1.5%, while the Rubber Manufacturers Assoc. (RMA) is -18.8%. In addition, he said SRNA’s July business in this sector is +23.1% over last year, due in part to the company’s Wildpeak A/T Trail and Wildpeak HT02 setting record months.

In regard to performance by channel, Leeper said all channels are now showing signs of recovery.

“We’re finally seeing corporate retail come back,” he said. “Car dealerships are looking really robust and they actually didn’t slow down much during COVID-19. Our regional wholesalers continue to perform very strong across almost every region. We’re very pleased with our performance since the bottom dropped out in April.”

Leeper added SRNA’s backorders have been increasing, but are “coming down slowly.”

“We didn’t really order much in April and May, but once we realized we were going to recover, and recover very quickly, we placed huge orders.”

TBR Sales Update

Bob Klimm, director of sales for SRNA’s TBR division in North America, said the company saw expansion in both new orders and production in July. Most manufacturing sectors were also up.

Total freight softened in the latest data after hitting an index high Aug. 6. However, Klimm added, freight has now reached pre-pandemic levels again. Dry van, flatbed and reefer load-to-truck ratios saw m/m increases in July, at 25%, 16.1% and 34.8%, respectively.

“This is no doubt being fueled by the restocking and various businesses coming back online,” Klimm said.

Klimm said YTD, Falken has increased its market share at an approximate 6% increase over last year; the market overall, according to USTMA, is seeing an overall decrease of 7.4%.

“So far this year, we are outperforming the market for six out of seven months,” Klimm added.