Indian Tyre Companies Gain After CVD Duty On Chinese TBR Tyre Imports.

Indian tyre companies gain after CVD duty on Chinese TBR tire imports:

The government imposed CVD for five years on new pneumatic radial tyres above 16 inches, which are imported from China, shares of JK Tyre, CEAT, MRF, and Apollo Tyres went up between 3 percent and 5 percent surge.


The government's decision to impose a countervailing duty (CVD) on imports of Redial Tyres from China is likely to be incrementally positive for tyre manufacturers, as the replacement Market would see a higher inflow of tyres from the listed/organized players feel experts. The dampener, however, is the overall slowdown in the auto industry as reflected in the sales numbers of the past few months, they believe.

On Tuesday, the government imposed CVD for five years on new pneumatic Redial Tyres above 16 inches, which are imported from China. These tyres are normally used in buses and trucks. The Centre listed nearly eight tariff items and the duty ranges from 9.12 percent to 17.57 percent.

Tyre companies have been under pressure of late, owing to headwinds such as rising raw material costs and stagnant demand due to the slowdown in auto sales. Natural rubber price has turned positive after a gap of two years in the domestic market during the first quarter of the current fiscal year (Q1FY20). The price of natural rubber has risen a staggering 23 percent from a low of Rs 11,915 in January and is currently at Rs 14,579, the report added citing
Rubber Board data.

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"Since Tyre companies were facing headwinds, such a move was expected by the government. They were unable to compete with Chinese companies, hence the government took this step to protect the interests of the domestic players. However, To protect the industry doesn't necessarily mean these firms will increase their profit manifold."

It is just that they will not make losses, but will sustain. With a slowdown in the auto sector, the incremental sales will be tough to come by. 

Therefore, it won't be a gamechanger for the tyre sector, but at least competition will not erode their margin from here on.

All tyres stocks have given negative returns in the calendar year 2019 (CY19). Notable names such as MRF, Apollo Tyres, Ceat and jk tyre have slipped in the range of 15-28 percent during the period. 

The nifty Auto index has slumped around 15 percent. On the other hand, the benchmark Nifty50 index has gained nearly 9 percent, ACE Equity data show.

"The monthly run rate of TBR (total truck and bus radial tyres) imports has dropped 60 percent from levels seen just before the imposition of anti-dumping duty (ADD), effective September 2017. Imports from China in the aforesaid period have dropped in excess of 80 percent. Hence, CVD measure, though incrementally beneficial, is unlikely to prove to be a gamechanger," said analysts at ICICI Securities in a report.

Update-26 May 2019

only heading change body article not change the news according to business line