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VW and GM drive Mexico's growth; SQM sees little reward for its restraint

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VW and GM drive Mexico's growth; SQM sees little reward for its restraint

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.

Volkswagen, General Motors drive Mexican export acceleration
Mexico’s international trade activity climbed 4.4% year over year in July, helped by an 8.6% gain in non-petroleum exports, according to Panjiva data. The latter represented an acceleration from 6.0% in the second quarter. The largest contributor to the expansion was the U.S., with exports that rose 10.7% due to a 16.0% jump in automotive industry shipments.

Panjiva data shows that the fastest growing auto exporters to the U.S. were Volkswagen AG, with a 35.8% year-over-year increase in shipments to the U.S. for July, while General Motors Co. climbed 26.2%. Fiat Chrysler Automobiles NV slid 5.8%, though that was a slower rate of decline than the prior month. The auto exporters may be looking to offset slower sales in Mexico, which fell 7.9% in July.

(Panjiva Research - Autos)

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SQM's restraint goes unrewarded as lithium prices slide
A drop in the global price for lithium may have driven a year-over-year decline in profitability at Sociedad Quimica y Minera de Chile SA (SQM) and Tianqi Lithium Corp. according to media reports. The extent of oversupply in the lithium industry can be seen in a 10.5% year-over-year surge in exports from Chile in June, according to Panjiva data.

That has come at the same time as a 17.8% drop in average export values per ton in the second quarter from Chile compared to the first quarter. The resulting $9.614 per ton average export value compares to $13,768 per ton in January.

SQM has been more restrained than average with Panjiva data indicating the firm’s exports have suffered a 0.5% year-over-year drop in the second quarter. SQM may also have favored Chinese buyers — whose imports from Chile rose 43.3% — over those from Japan and South Korea. That may be a sign of Tianqi Lithium exerting more influence after taking a stake in SQM in 2018.

(Panjiva Research - Metals & Mining)

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New semiconductor spat arrives as chip export slide slows
The global semiconductor industry’s exports continue to struggle, with the total across four major exporting states having fallen by 1.6% year over year in July, Panjiva's analysis of government statistics shows. South Korea continues to be the worst performer with a 28.1% drop. While the trade spat with Japan overshadows the sector in South Korea, there has at least been a resumption of critical chemicals shipments from Japan.

Shipments from Taiwan grew 5.9% year over year in July, though a patent case brought in the U.S. by GLOBALFOUNDRIES Inc. against Taiwan Semiconductor Manufacturing Company Ltd. (TSMC) may disrupt shipments in the future.

Chinese exports surged 31.7% higher to a record $9.24 billion despite U.S. tariffs. The latter have recently been increased to 30% from 25% and may act as a further brake on U.S. imports from there. Even excluding shipments from China though, U.S. imports of semiconductors have declined by 4.1% year over year in June, driven by lower processor and memory shipments.

(Panjiva Research - Tech. Hardware)

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U.S. Steel layoffs hint at tariffs failing to do their job
U.S. Steel Corp. has announced temporary layoffs in its Michigan facilities due to steel lower prices and demand. That has come despite tariffs on imports of steel under the section 232 program that have led to a 20.2% year-over-year drop in imports in the second quarter of 2019, according to Panjiva shipment data.

An exemption from tariffs for imports from Canada and Mexico has done little to bolster shipments to the U.S., which fell 31.7% and 30.1% respectively over the same period.

Notably shipments from China only fell 7.2% despite the more extensive section 301 duties applied to imports from there. The sector’s supply chain is also complicated by product-specific tariffs and reviews, most recently including a tariff circumvention case relating to corrosion resistant steel.

(Panjiva Research - Metals & Mining)

FILA finds its way to growth, Ikea cuts as Baltimore prepares to expand
The Maryland Port Authority has started investments to increase capacity at the port of Baltimore. That has followed steady but slowing growth in which container handling rose 5.5% year over year in the 12 months to June 30, down from a 7.3% annualized rate in the previous three years, according to Port Authority data.

Reduced imports from China — which fell 1.0% year over year in the 12 months to June 30 and dropped 4.9% in the second quarter — are to blame for the slowdown in growth, though imports from the rest of Asia and from Europe have compensated. While the outcome of the U.S.-China trade war remains uncertain, there have already been signs of reduced imports by consumer goods companies to Baltimore.

Panjiva data shows imports associated with IKEA AB fell 17.3% year over year in the second quarter though there may have been a stockpiling-related bump upward in July. Sports apparel manufacturer F.I.L.A. - Fabbrica Italiana Lapis ed Affini SpA meanwhile may have been stockpiling ahead of list 4 tariffs on Chinese exports its second-quarter imports climbed 82.0% year over year.

(Panjiva Research - Logistics)

European trade sentiment turns for the better, still close to the worst
European business sentiment toward export orders is improving, but is still firmly negative. The latest IFO survey for Germany shows a net 2.1% of managers see lower orders from 2.7% a month earlier, though that is still the second lowest result since 2012. There is a similar pattern in France’s INSEE survey.

The risks of a no-deal Brexit are likely to blame, though exports to the U.K. are already in decline with those from Germany having fallen by 26.2% year over year in June and those from France down 3.2%. European exporters also face policy risks in the U.S., particularly for the automotive and aerospace industries.

(Panjiva Research - Policy)

Christopher Rogers is a senior researcher at Panjiva, which is 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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