24 May, 2021
Ford delivers for Biden; EU's pivot away from China could help US steel
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.
Ford delivers on Biden's battery promise, Mexico may benefit
Ford Motor Co. and SK Innovation Co. Ltd. have launched a joint venture to build electric vehicle batteries in North America, with a rollout through the mid-2020s. While Ford's electric vehicle supply chain is still ramping up, its traditional supply chain may be struggling in part due to semiconductor availability. Mexican imports of parts for Ford dropped 60.7% year over year in March.
The setting up of battery production is consistent with the Biden administration's critical supply chain policies. A review of the latter is set to be published in June, potentially revealing new incentives.
In the meantime. the increased U.S. reliance on imported lithium-ion batteries can be seen in a 68.7% year-over-year jump in seaborne imports in the three months to April 30. The surge was led in absolute terms by a 64.1% jump in imports linked to Tesla Inc. while the return of SK Innovation to the market explains much of the remainder.
Changes afoot for steel as EU trade policy pivots back to US
The EU's trade policy is trending away from China and towards the U.S. An update to the EU's industrial policy is aimed at increasing its strategic autonomy and includes measures to factor state aid in non-EU countries into trade policy measures. That will likely target countries such as China with large state-owned enterprises.
The European Parliament has also frozen ratification of the Comprehensive Agreement on Investment with China citing a need for "rebalancing EU-China relations."
At the same time, relations with the U.S. have thawed, with proposals regarding steel/aluminum tariffs set to be made in June and a resolution on aerospace subsidies set for July. EU plans for a carbon border tax may stymie the process if they increase the cost of steel imported from the U.S.
Shipments of U.S. steel and aluminum to the EU fell 33.8% year over year in the first quarter of 2021 and were 50.7% lower than the same period of 2017. U.S. imports of the same from the EU, meanwhile, fell only 13.3% year over year. They were also 6.8x larger than the reverse flows in dollar terms.
A handful of EU suppliers are starting to scale up supplies, potentially in anticipation of a deal. U.S. seaborne imports of steel and aluminum from Europe rose 11.4% year over year in April, including a 69.5% jump in shipments linked to Vallourec SA and a 20.4% rise in those associated with Outokumpu Oyj.
Deere pays the price to avoid supply chain challenges, harvest growth potential
Deere & Co. reported revenues for the fiscal second quarter ended May 2 that jumped 30.3% year over year, beating analysts' estimates by 4.2 percentage points. That came despite sourcing challenges which the company expects to increase through the balance of the year. The agricultural equipment maker is clearly having success, though, with U.S. seaborne imports linked to the company up 52.5% year over year in April after a 29.4% rise in the first quarter of 2021.
One issue going forward may be access to semiconductors, which is "a significant risk to [its] production schedule for the remainder of the year," according to the president of Deere's worldwide ag & turf division, Cory Reed. The company also faces "significant inflation for both raw materials and logistics, which will continue to hit [the company] throughout the second half of the year."
Deere is raising prices to pass those costs on. Maintaining higher prices will depend on the actions of its competitors who are rapidly increasing their supplies, too. Total U.S. seaborne imports of agricultural equipment jumped 69.8% year over year in April, led by a 159.4% rise in shipments linked to CLAAS KGaA mbH and a 166.3% increase in imports associated with AGCO Corp.
(Panjiva Research – Industrials)
Shoe industry might not be ready for formal summer
Shoe Carnival Inc. reported revenue growth of 122.6% year over year in the 13 weeks to May 1, helped by the absence of store closures a year ago linked to COVID-19. Growth has come "despite ongoing supply chain issues," according to CEO Cliff Sifford, although the company is "expecting supply chain issues to normalize during the second half of the calendar year."
Sifford also noted a change in the mix of products that customers are buying toward formalwear. Total U.S. imports of shoes rose 8.5% year over year in the first quarter of 2021 and by 31.0% than a year earlier in April. However, imports were down 2.5% compared to the same period in 2019.
Imports of formal footwear were 43.6% below 2019 levels in April. That would suggest formal importers including Steven Madden Ltd. and Hugo Boss AG may be struggling to keep up with demand. Sports shoes are doing much better, with a 65.8% rise in April led by Puma SE and Wolverine World Wide Inc.
(Panjiva Research – Consumer Discretionary)
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.
The Supply Chain Daily has an editorial deadline of 7:00 a.m. ET. Some external links may require a subscription. Links are current at the time of publication. S&P Global Market Intelligence is not responsible if those links are unavailable later.