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.
Panalpina, DSV head in opposite directions as volume growth sags
The global freight forwarding sector experienced revenue growth of just 1.5% year over year in the second quarter, based on the financial reports of the 12 largest operators. That was in part down to a drop in global airfreight volumes as well as lackluster seafreight growth. Nonetheless, the sector's profitability has improved as a result of cost-cutting plans, particularly at DSV A/S, Kuehne + Nagel International AG and United Parcel Service Inc. Slow growth looks set to continue at the start of the third quarter.
Panjiva's U.S. seaborne, inbound data shows a 1.6% year-over-year expansion in total imports, including a 3.0% slip in shipments from China. The worst performer among the major freight forwarders was Panalpina Welttransport (Holding) AG with a 15.8% year-over-year drop.
That is a marked contrast to DSV, which is in the process of acquiring Panalpina and saw an 18.2% surge in traffic. Among the large U.S.-domiciled forwarders, only Expeditors International of Washington Inc. saw an improvement in traffic, and that was at a near-average 1.5%.
Maersk slows, identifies tangible tariff worries
A.P. Møller - Mærsk A/S delivered revenue growth of just 0.6% year over year in the second quarter, including volume growth of 1.4% in the container-line business and a 6.6% drop in ocean freight handled by its forwarding operations.
The firm has warned that the U.S.-China trade war could have a marked impact on tariffs, stating that the recent increase in duties "could in isolation remove 0.5% of global container demand" in 2020. Additionally, Maersk has stated that the so-called list four tariffs "could result in a reduction of up to 1% in 2020." That compares to the company's growth forecast, ex-tariffs, of just 1% to 3% year over year.
The challenge can already be seen in Panjiva's data for U.S. seaborne imports associated with Maersk where shipments from China fell 10.9% year over year in July. An increase in shipments from Asia excluding China of 5.0% — representing suppliers rotating their operations away from China — was not sufficient to offset the decline from China as well as a slide in shipments from Europe.
Lenovo lines up laptop price hikes if tariffs require relocation
Computer manufacturer Lenovo Group Ltd. may reorient its supply chain in relation to the forthcoming round of tariffs on laptop computers. While those won't take effect until Dec. 15, CEO Yang Yuanqing has stated that a relocation will mean "the manufacturing cost will be higher" and "that will be reflected in the retail price as well."
Panjiva's data shows Lenovo may have already cut its U.S. seaborne imports of laptop computers from China by 26.5% year over year in the second quarter. That comes amid a wider supply chain restructuring that has seen its total imports from China fall 13.8% year over year in the second quarter. Those may have been partly replaced by imports from Mexico, which climbed 32.0% over the same period.
Brexit Watch: Modular deal with US needed to avoid tariff trouble later
The risk of a no-deal Brexit brings with it the opportunity of signing short-term trade deals. U.S. National Security Adviser John Bolton has held out the possibility of a "sector by sector" trade deal built "in a modular fashion" shortly after Brexit. The automotive sector may benefit in particular given that the U.S. is considering new tariffs under the section 232 process as soon as November.
British exports of autos globally fell 14.4% year over year in the second quarter and by 9.3% over the past 12 months. Exports to the U.S. did better than average, rising 3.3% in the second quarter. Among the major exporters to the U.S., Panjiva data shows Honda Motor Co. Ltd. was typical with a 6.4% slide in shipments associated with the Japanese automaker in the second quarter. Shipments associated with Tata Motors Ltd.'s Jaguar Land Rover, meanwhile, saw a 13.8% rise, possibly linked to new model releases.
Tesla, Audi pole matters as electric vehicle sales power up
Global electric and plug-in hybrid vehicle sales surged 27.6% year over year in the second quarter, according to S&P Global Platts, with U.S. sales up 26.0%. U.S. exports, including those by Tesla Inc. and General Motors Co., climbed 51.5% in the second quarter, Panjiva data shows.
That came despite a 34.4% drop in shipments to China resulting from tariffs applied in 2018 as a result of the two countries' trade war. Shipments to Europe jumped 4.7x, likely due to sales of Tesla's Model 3. U.S. imports climbed 120.3%, led by shipments from Europe. That would suggest new models including Jaguar's I-Pace and Volkswagen AG's Audi eTron could take market share from Tesla.
Red Bull, Roche rise rapidly as Norfolk's traffic slows
Container handling through the port of Norfolk in Virginia increased 5.1% year over year in July. That was down from 12.9% in the second quarter and was largely the result of a 0.1% decline in imports from China after a 7.0% rise in the second quarter. Imports from Europe have continued to grow with an 8.3% expansion.
Consumer goods companies likely led the way, with shipments associated with beverages manufacturer Red Bull GmbH having risen by 29.1%. In other sectors, Panjiva data shows that power tool manufacturer ANDREAS STIHL AG & Co. KG may have seen a 20.9% rise while shipments associated with healthcare firm Roche Holding AG grew 90.8%.
Chinese exporters continue to soak up (a proportion of) U.S. tariffs
U.S. trade price deflation continued for a third month in July, with import prices falling 1.8% year over year and exports by 0.9%. At the regional level, that was led by imports from Asia, with import prices from ASEAN down 2.0% while prices for imports from China fell 1.6%.
The latter can be linked to Chinese exporters absorbing a proportion of the increase in tariffs applied under the section 301 program. Imports of chemicals — where 25% duties have been applied in stages since July 2018 — saw price deflation of 11.8%. For furniture, where in May tariffs were increased to 25% from 10%, price deflation rose to 0.9%.
Taken in the aggregate, the dollar value of the Chinese price deflation was $662 million year over year. By comparison, the total increase in U.S. customs duty income — driven largely by duties on Chinese exports — came to $2.31 billion over the same period.
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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