Amazon, ZIM have booming October; no gifts for renewables

The Supply Chain Edge provides a curated weekly 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.

THIS WEEK'S TOP RESEARCH

Amazon forwarding booms; K+N, DSV sustain YOY growth

Imports to the U.S. continued a trend of slowing growth in October, and forwarders were no exception. Overall imports grew 3.1% year over year, while imports originating in Chinese and European ports increased 6.9% and 5.5%, respectively. This indicates that while not immune to the overall trend, established trading networks in those regions are likely more resilient to supply chain issues.

The capacity bottlenecks have exposed weak points in supply chains such as chassis availability, port space, trucking and warehousing, as containers are not able to find transit to inland destinations. This results in containers piling up at the ports with nowhere to go as ships continue to deliver more goods. This may be compounded by a surge in imports of empty containers, with those of Kuehne + Nagel International AG, or K+N, and Expeditors Inc. increasing 13.5% and 140.9% year over year in October, respectively.

Panjiva data by forwarder shows a general slowing of import growth across the board, with the exception of Amazon.com Inc. The volume of its e-commerce-enabling freight services increased 77.1% year over year. While starting from a low base compared with more established carriers, the ramp-up in Amazon's shipping activity is likely a sign of its e-commerce business preparing for the holidays. The year-over-year growth rate in October of other forwarders such as K+N and DSV A/S — 16.4% and 13.5%, respectively — was slower than in the third quarter (26.3% and 23.8%, respectively). This was possibly due to shippers sending goods for the holiday season early.

At the other end of the spectrum, Honour Lane Shipping Ltd.'s growth in October fell 33.5% year over year, potentially around news of a sale, while that of Orient Star Holdings LLC turned from increasing 4.5% in the third quarter to decreasing 24.5% in October.

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ZIM, MSC lead 2M import growth in October

Carriers have continued to benefit from the surge in imports, increasing profits over previous years due to a positive volume and rate environment. Net income for the container shipping industry totaled $48.1 billion in the third quarter, and this will likely impact the strategy and plans of carriers into the new year. Carriers are likely wary of allowing rates to fall too fast if the market turns, while shippers will probably be looking to guarantee lower rates in the same scenario.

This puts additional scrutiny on contracts for next year — if shippers or carriers are wrong in their price projections, it could be costly for them. The calculation is likely made tougher by shipping rates that are staying stubbornly high for China-U.S. West Coast routes, up 1.5% Nov. 25 against the October average. Average rates out of China fell 2.8% in the same period, drawn downward by falls in pricing on routes to South Africa and Europe, potentially because the first detection of the omicron variant of the coronavirus in these markets has led to uncertainty.

Empty containers will also likely start to be more of a concern for carriers, as the overloaded West Coast ports of Seattle, Los Angeles and Long Beach, Calif., start implementing fees for late collection of unloaded containers. This is the ports' attempt to remedy the thousands of containers clogging them up, but they may still run into issues with chassis and trucking availability. These fees could also easily end up being charged to shippers and so add another wrinkle to cost negotiations.

2M had the highest volume growth rate among the three major shipping alliances, up 7.1% year over year in October, while volumes for competitors Ocean Alliance and THE Alliance fell 4.1% and 12.1% year over year, respectively. The increase for 2M was led by ZIM Integrated Shipping Services Ltd. and Msc Mediterranean Shipping Company Holding SA, up 27.1% and 13.6% in the same period. THE Alliance member Yang Ming Marine Transport Corp. had the lowest growth rate among major shippers: a 26.1% year-over-year decline. Meanwhile, unaffiliated Matson Inc. enjoyed strong growth, up 45.4% year over year in October.

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Yarn, wind power face new duties; olives poised to wrinkle US-EU relationship

The U.S. International Trade Commission, or USITC, has issued a variety of rulings in November, with polyester yarn, wind towers and solar panels all receiving some form of additional tariff burden. The polyester yarn ruling targeted subject imports from Malaysia, Indonesia, Thailand and Vietnam that were being sold under their fair value; these accounted for 30.5% of U.S. yarn imports in the first three quarters.

U.S. yarn imports from these countries fell 23.5% year over year in the third quarter, likely in anticipation of the ruling, while fellow member countries of the U.S.-Mexico-Canada Agreement, or USMCA, may benefit, with yarn imports increasing 32.1% year over year in the same period.

There's no end in sight for tariffs on imports of solar panels: the current Section 201 safeguard duties were due to expire in February 2022, but the USITC recommended extending the measure. Imports of solar panels fell 23.3% year over year in the third quarter.

Other renewable energy imports saw cost setbacks as the USITC also voted to apply antidumping and countervailing duties to imports of industrial-scale wind towers from India and Malaysia. Imports from those two countries accounted for 26.0% of the total in the first three quarters but had fallen 52.6% year over year in the third quarter. This decision also likely benefits exporters from USMCA countries, whose share of imports increased to 25.9% in the same three quarters.

Meanwhile, the World Trade Organization ruled on a U.S.-EU dispute over Spanish olives. The EU alleged that the U.S. Commerce Department had incorrectly interpreted EU agricultural subsidies and so had applied countervailing duties, and this was confirmed by the WTO. The U.S. can choose to appeal the ruling, but as the WTO appellate body does not currently have a quorum, this would leave the whole matter in limbo, and the EU might retaliate. Having enjoyed recent successes negotiating digital service taxes and national security tariffs, the U.S. and the EU may decide that this could be another area to cement better trade relations.

Read full article here.

GLOBAL SUPPLY CHAIN WRAP

US and India reach agreement on digital taxes

The U.S. and India have agreed on a deal regarding digital service taxes, meaning that India can continue to implement its domestic scheme until the arrival of a global framework developed by the Organization for Economic Co-operation and Development, or OECD. This marks the last outstanding digital service tax investigation launched by the U.S. and continues the precedent that any taxes paid above the final OECD level will be credited back to companies. These agreements — with France, the U.K. and Turkey, among others — likely prevent U.S. retaliatory tariffs that could spark additional trade tensions.
(World Trade Online)

Chip counterfeiting grows, increasing fear of supply chain attacks, malicious or otherwise

The global chip shortage has spawned an epidemic of counterfeits, attracting the attention of distributors. This is an expected outcome for goods in high demand and short supply, but the sophistication needed to counterfeit semiconductors has meant that historically it has been confined to cybercrime activity such as supply chain attacks. This new wave of counterfeiting has inspired an additional business line for chip traders: authenticating microchips and looking for irregularities on the surface and in markings. This shows the worry and danger of the supply chain of a critical good being compromised, meaning that processes first implemented in military supply chains for validating components have had to work their way down the value chain.
(Financial Times)

Spirits industry hit by supply chain issues, seeks creative packaging

Distillers are reporting trouble in securing bottles as supply chain issues work their way into additional industries. One distiller found a work-around by using wine bottles but ran into yet another supply chain issue as the new bottles could not be handled by the distributor. This shows the interconnectedness of modern supply chains: a simple change upstream can have major ramifications a few steps below. Part of the problem may also be demand pulling additional inventory out of the network as consumer spending on alcohol increases. Some companies are looking at alternative methods such as plastic or paperboard containers, but changes in manufacturing could be too late for the critical holiday season.
(Financial Times)

87 ships, new paperwork and a partridge in a pear tree

The number of vessels waiting outside the West Coast ports of Los Angeles and Long Beach, Calif., climbed to 87 as of Nov. 26, showing the staying power of congestion. Fixing the issue is a complex, multifaceted process that would involve cooperation across many parties that traditionally operate independently and may not have aligned incentives. Like when cars are stuck in traffic, the congestion is unlikely to ease quickly unless everybody can hit the gas at the same time. On the southern border, new Mexican regulations aimed at stopping smuggling could cause delays as shippers learn the new rules. These rules, known as the Carta Porte supplement, involve additional paperwork, which if done incorrectly leaves shippers subject to a $4,500 fine. The new regulations also show the importance of digitalization, as shippers on the front end of the trend may adjust quicker.
(ShippingWatch; FreightWaves)

Eric Oak is a researcher 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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