29 Jan, 2021
Soaring freight costs hit Tesla, Autoliv earnings; new India tariff round looms
By Chris Rogers
The Supply Chain Daily provides a curated overview of Panjiva's research and insights covering global trade policy, the logistics sector and industrial supply chains and draws from global shipping and freight data.
Tesla tackles higher shipping costs as governments jostle to support battery onshoring
Tesla Inc. reported its highest vehicle sales in the fourth quarter of 2020, though earnings were below analysts' estimates. That was the result of elevated expenses from "logistics and labor costs [that] were impacted due to supply chain instability and pandemic inefficiencies" and specifically "shipping, in particular, boats between Asia and North America," according to Jerome Guillen, president of the company's automotive division.
Elevated shipping rates are a particular issue for lengthy automotive supply chains. Shortening them is somewhat easier in the electric vehicle space given the importance of, and potential to localize, battery production. There is an emerging arms race between governments to encourage such onshoring.
The EU has just launched a new battery innovation project with €2.9 billion ($3.52 billion) of funding, while the Biden administration will reportedly support the sector and the Chinese government is close to launching the 14th Five Year Plan.
China accounted for 58.6% of U.S. imports of automotive lithium-ion batteries in the three months to Nov. 30, 2020, after shipments climbed 820% from a year earlier. That may reflect shipments linked to Clarios LLC. Total U.S. seaborne imports of lithium-ion batteries more broadly climbed 64.5% year over year in December 2020, with shipments linked to Samsung SDI Co. Ltd. and LG Chem Ltd. up by 282% and 339%, respectively.
Autoliv faces freight cost hazard while demand recovers
Autoliv Inc. reported 14.8% revenue growth year over year in the fourth quarter of 2020 as the auto safety component producer benefited from a recovery in the demand for new cars and light trucks. Yet, the company has faced $20 million of additional costs, versus operating income of $382 million, in 2020 to cover spending on "personal protective equipment, temporary supplier support, and premium freight."
Container shipping costs remain elevated in the new year while a shortage of semiconductors may lead Autoliv's original equipment manufacturer customers to cut production and demand for the company's products. U.S. seaborne imports linked to Autoliv improved by 21.0% year over year in December 2020.
Exports of airbag and seatbelt products linked to the company from Mexico climbed 18.2% compared to a year earlier, while those linked to TRW Automotive Holdings Corp. and Toyoda Gosei Co. Ltd. increased by 28.1% and 9.3%, respectively.
Make in India tariffs reach refrigerators as Samsung, LG scale up supplies
The Indian government will reportedly introduce new trade-related measures in its budget on Feb. 1, potentially including tariffs on imports of home appliances and components. That is likely designed to continue promoting the Modi administration's "Make in India" policy of encouraging manufacturers to onshore production to India.
Indian imports of home appliances and parts declined 16.4% year over year in the three months to Oct. 31, 2020, including a 29.8% slide in air conditioners and a 21.3% decline in fridges/freezers. Air conditioner specialists Carrier Corp and Daikin IndustriesLtd. led the drop in air conditioner shipments, with declines of 68.7% and 57.1%, respectively.
Diversified suppliers LG Electronics Inc. and Samsung Electronics Co. Ltd., meanwhile, saw growth of 146% and 402%, respectively, and have been active in onshoring elsewhere in the world, most recently in the U.S.
(Panjiva Research - Consumer Discretionary)
Shipping costs building up for U.K. lengthy construction supply chains
The U.K. construction industry is facing shortages and higher costs for components due to "factors including high demand, coupled with escalating prices for shipping and delays at some British ports," according to the Builders Merchant Federation.
Elevated shipping costs are a global phenomenon and will likely continue to impact companies' costs through much of the first half of 2021. U.K. imports of building supplies depend heavily on markets outside Europe, with China representing 19.1% of shipments and the U.S. 13.8%.
Imports rose by 9.8% year over year in the three months to Nov. 30, 2020, potentially reflecting increased demand and pre-Brexit stockpiling. U.S. seaborne exports of wood, steel and stone building materials to the U.K. climbed 17.4% in the fourth quarter of last year, led by a 22.5% surge in shipments of fasteners and a 177% increase in construction steel products.
(Panjiva Research - Industrials)
U.S. trade recovery contingent on farm sales, autos supply chains
U.S. merchandise trade climbed 1.8% year over year in December 2020, the second month of improvement. Yet, there was a marked split in performance between exports and imports. Exports fell for the 12th month with a 2.6% drop despite a 30.7% surge in exports of food and beverages.
The latter was tied to the U.S.-China phase one trade deal, which the Biden administration looks set to continue with. Imports, meanwhile, grew at a slower rate of 4.7% due to a drop in industrial supplies, including the continued impact of lower oil prices.
The automotive industry, meanwhile, saw exports return to growth of 3.2%, while imports climbed 10.0%, leaving the value of bilateral trade at its highest since at least 2010. There are risks to that growth, however, with emerging bottlenecks including the availability of semiconductors and logistics congestion.
Christopher Rogers and Eric Oak are researchers at Panjiva, a business line of S&P Global Market Intelligence, a division of S&P Global Inc. This content does not constitute investment advice, and the views and opinions expressed in this piece are those of the author and do not necessarily represent the views of S&P Global Market Intelligence.
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