'Buy American' matters most for infrastructure; no relief yet for logistics

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.

Biden's 'Buy American' provides a new vehicle for dealing with an old sector
U.S. President Joe Biden has published a long-awaited "Buy American" executive order. From a practical perspective, 97% of U.S. government contracts already go to American companies, with the order's targets therefore being second-tier suppliers. There may be regulatory challenges under World Trade Organization and United States-Mexico-Canada Agreement complaint procedures, though the details of the new plans require a Federal Acquisition Regulatory Council review that could take six months to complete.

The steel industry gets a specific mention, suggesting there may be a significant federal infrastructure plan on the way. U.S. imports of construction rebar, structural steel products, pipes and rail tracks have dropped 29.9% year over year in the 12 months to Nov. 30, 2020. Shipments from China slumped 37.2% while those from Mexico and Canada dipped 6.2%.

Exporters from Mexico may appeal the new rules under USMCA regulations. Leading exporters of structural steels from Mexico to the U.S. include Tenaris SA, led by oil pipes, and Industrias CH SAB de CV for construction, declined by 28.4% and 70.1% year over year, respectively, in the three months to Nov. 30, 2020. Shipments linked to Deacero SA de CV meanwhile, also focused on construction steel, soared 88.6% higher.

(Panjiva Research - Policy)

Deceleration, but no relief, for hard-pressed U.S. supply chains in January
The rapid ascent in U.S. trade activity seen throughout the fourth quarter of 2020 may be slowing, though relief for the hard-pressed logistics sector has yet to arrive. U.S. seaborne imports in the first two weeks of January increased 9.6% year over year, down from 20.4% in December 2020 and a double-digit growth rate throughout the fourth quarter of 2020.

Shipments into the ports of Los Angeles and Long Beach rose by just 2.5%, suggesting congestion may be taking a toll. Shipments to New York jumped 35.4%, indicating the imbalances in global shipping. Imports from China grew by 14.0%, down from over 30% throughout the fourth quarter of 2020, reflecting, in part, a reduced but still substantial expansion in consumer goods demand.

Imports of consumer electronics slowed to growth of 7.2% from 22.3% in December 2020 while home furnishings slowed to a still considerable 28.2% from 42.8%.

(Panjiva Research - Logistics)

Key Tronic unlocks onshoring growth after pandemic, trade war
Tier 2 automotive component supplier Key Tronic Corp. reported fourth-quarter 2020 revenue growth of 10% year over year due to the "trend of contract manufacturing returning to North America," CEO Craig Gates said. That is likely linked to the fallout from the U.S.-China trade war, USMCA and the early stages of supply chain restructuring linked to the coronavirus pandemic, all of which are trends that will likely continue in 2021.

Gates has warned that the company "remains vulnerable to temporary disruptions caused by a flare-up of the virus and associated lockdowns and regulations," but is using a mixture of alternative supply lines and "safety stocks" to cope. A 1.9% year-over-year drop in supplies from the company's Mexican operations in October 2020 followed by a 22.4% rebound in November 2020 after a factory closure illustrates the risks involved.

The company has cut its reliance on China, with the country accounting for 16.0% of U.S. imports linked to the company in the 12 months to Nov. 30, 2020, compared to 20.0% in 2017.

(Panjiva Research - Tech. Hardware)

Smart doorbell imports knocked as IP infraction case arrives
The U.S. International Trade Commission will investigate an intellectual property infraction case linked to imports of smart doorbells by Vivint Smart Home Inc., SimpliSafe Inc. and Arlo Technologies Inc. Total U.S. seaborne imports linked to the three rose by 86.4% year over year in the fourth quarter of 2020, including a 420% surge in shipments associated with Vivint Smart Home.

At the same time, there has been a downturn in U.S. imports of doorbells more broadly, running contrary to increased spending on home maintenance. Total U.S. imports declined by 16.7% year over year in the three months to Nov. 30, 2020, including a decline in shipments associated with Hangzhou Hikvision Digital Technology Co. Ltd. due to sanctions as well as Hon Hai Precision Industry Co. Ltd.

(Panjiva Research - Tech. Hardware)

Australian exports return to growth even as China trade war keeps its grip
Australian exports increased in December 2020 for the first time in 11 months, rising by 2.5% year over year. That included a 0.3% improvement in exports to China despite the trade war between the two countries. The uptick largely reflects a surge in shipments of iron ore.

Total Australian exports of coal and beverages, which have reportedly been targeted by China during the trade spat, dropped by 23.4% and 28.0%, respectively. Shipments of wood fell by 22.6%.

Politics in the region remain complex. China has signed a trade deal with New Zealand that will slash barriers to trade in wood products while there may be a split emerging in Australia's ruling coalition regarding tariffs.

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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