South Korea's three major tire manufacturers—Hankook, Kumho, and Nexen—are facing significant challenges in maintaining profitability in the second half of 2026. The impact of the Middle East conflict has led to increased logistics costs, compounded by rising raw material prices and tariffs from the United States and the European Union (EU). How effectively these companies can offset the increased costs will be crucial moving forward.
According to industry sources, the pressure on profitability for the tire manufacturers is intensifying in the third quarter of this year. The most significant burden comes from the rising logistics costs stemming from the Middle East. Prolonged geopolitical uncertainties surrounding the Red Sea and the Strait of Hormuz have forced shipping companies to reroute, resulting in increased logistics expenses for manufacturers.
Indeed, maritime freight rates have surged compared to pre-war levels. The Shanghai Containerized Freight Index (SCFI), which reflects global container freight rates, recorded 3,662.18 on September 11. This marks an increase of approximately 2.75 times compared to 1,333.11 on February 27, just before the outbreak of the conflict, representing a rise of 174.7%. Tire manufacturers, heavily reliant on maritime transport, are particularly burdened by these costs.
Additionally, the rise in raw material prices and tariffs adds further risk. Due to instability in the Middle East, international oil prices remain high, causing the price of synthetic rubber, a key tire material, to rise again. According to the Chinese raw material data firm Sunsirs, the price of butadiene rubber (BR), primarily used in tires, increased by 11.2% to 15,290 yuan per ton as of September 15 compared to a month earlier.
The anti-dumping tariffs imposed by the U.S. and EU also pose a challenge to profitability in the second half of the year. The European Commission confirmed anti-dumping tariffs on Chinese-made passenger and light truck tires in July. The U.S. Department of Commerce also announced anti-dumping tariffs on South Korean passenger and light truck tires in July. As a result, the three tire manufacturers now face tariffs on exports to both the EU and the U.S., raising concerns about their performance in the market.
Market analysts expect a decline in profitability for the second half of the year. Financial information provider FnGuide estimates that the combined operating profit for the three tire manufacturers in the third quarter will be approximately 729.6 billion won, a decrease of about 1.5% from 741 billion won in the same period last year. Ultimately, how these companies strategize to offset rising costs will be critical for their performance in the latter half of the year.
* This article has been translated by AI.
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