Just when we thought supply chain issues were over and brake drum prices were normalizing, two major issues have arisen causing turmoil in brake drum pricing.
Anti-Dumping/Countervailing Duties
The first issue is that an anti-dumping duty/countervailing duty petition was filed by Webb Wheel with the International Trade Commission and the Department of Commerce. This petition alleges that imports from China and Turkey have injured the US brake drum market. Webb is asking for a 300.83% duty on heavy-duty brake drums from China and a 168.34% duty on heavy-duty brake drums from Turkey. This could raise the price of each brake drum from China or Turkey by up to $130. Since Webb would have the ability to raise their prices by the same amount due to lack of competition, this would create dramatic inflation in US heavy-duty brake drum market and effectively a “brake drum tax” to each fleet, owner-operator and ultimately the consumer.
We don’t believe the US brake drum manufacturers have the capacity to supply the entire US market. Thus, the balance would have to come from overseas at much higher prices. If the price of brake drums increase by $130 each, and if we estimate that there are 9 million brake drums sold in the US each year, that is an additional cost of $1.2 billion to the heavy-duty industry. If we see another drum shortage like we saw in 2021 and 2022, prices could soar even higher. This additional cost may also bring poor brake maintenance practices, creating a danger to our families on our roads.
If this petition gains traction and the Department of Commerce assesses an anti-dumping duty or a countervailing duty, we could see prices increase significantly by mid-September, or sooner. We are vehemently opposing the Webb petition and expending significant legal resources to fight this matter.
Ocean Freight Costs
The second issue appearing right now is another significant rise in ocean freight costs. According to Xeneta.com (https://xsi.xeneta.com), as of the middle of July, the cost of shipping a container from China to the US West Coast is approximately $7,900. At the beginning of this year, the cost was approximately $1,900. That $6,000 increase is approximately $15 per brake drum and is consistent with what we are seeing. If you haven’t seen this increase in your purchase price yet, it could be because you are buying already landed inventory and the manufacturer or importer hasn’t increased their inventory price. However, if ocean freight container prices continues to approach COVID ocean freight prices (we have been informed that there will be another container shipping cost increase of up to $2,000 on August 1), there may be another inventory shortage. Buying inventory now will probably be in your best interest.
While these two issues are unrelated and won’t likely affect each other except having the general effect of increasing the price of brake drums and possibly reducing the purchases of imported brake drums, it is important to note that there are going to be a lot of changes coming to brake drum availability and pricing. Ensuring you have adequate inventory to weather the upcoming changes will be crucial to the near-term success of your heavy-duty business.
