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.
Funko's toy import pop may be due to stockpiling, demand
An increasing number of companies are discussing tariffs and Brexit in their earnings conference calls, with 24.5% of calendar second-quarter reporting calls mentioning the two topics from 21.2% a quarter earlier. In the lead is consumer discretionary, which recorded a high of 36.7% of companies in the sector discussing Brexit or tariffs, up from 31.3% in the prior quarter. Increasing concerns about forthcoming U.S. automotive tariffs have been one driver, as has the potential for new tariffs by the U.S. on Chinese exports from Sept. 1 to cover consumer goods including apparel and toys.
Toymaker Funko Inc. is a case in point. CFO Russell Nickel said gross margins in the fourth quarter of the year could be hit by as much as 50 basis points. The company will offset that with a relatively small hike in prices to mitigate any adverse impact on demand.
Its recorded a 23.8% year-over-year increase in imports from mainland China and Hong Kong in July, alongside an 85.2% rise in imports from Vietnam. The former may reflect stockpiling as well as increased demand for Funko’s bobble head figures.
With 80 days to go until Brexit, trade is in decline with looming "selective" food shortages
British merchandise trade activity fell 2.8% year over year in June, driven by a 9.4% slump in trade with the EU and 6.7% for the quarter ended June 30 overall. With 80 days to go before a potential hard Brexit on Oct. 31, attention is turning to a renewed round of goods stockpiling. There was a 10.7% slump in imports from the EU in June compared to a year earlier and 8.0% for the quarter.
The situation may be particularly challenging in the food industry. Tim Rycroft, COO of the country's Food and Drink Federation, has indicated that there may be shortages for certain items, leading to potential price rises in months following a no-deal Brexit. The perishability of food makes stockpiling challenging, though there was an 11.8% year-over-year rise in imports of all foodstuffs in March ahead of the prior Brexit deadline.
The dairy industry is particularly exposed, with the EU representing 98.6% of U.K. imports in the 12 months to Jun. 30 after a 9.3% quarterly drop from the prior-year period. The EU accounted for 81.9% of meat and 77.2% of cereals imports to the U.K.
Biodiesel battle between EU and Indonesia may help US dairy farmers
Global trade policy shifts can intertwine sectors and countries in a complex web of knock-on effects. The EU is applying tariffs of up to 18% on Indonesian biofuel exports after they surged to 30.7% of the bloc’s imports total in the 12 months to May 31 from zero in 2017, or €703 million. The Indonesian government will sanction €302 million of EU dairy exports in response, or 2.7% of total EU dairy exports, at a tariffs of up to 18%.
That may provide an opening for U.S. dairy farmers and processors, who saw a 59.8% year-over-year slump in exports to China in the quarter to end June in trade-war related tariffs. Shipments to Indonesia from the U.S. — led by Dairy Farmers of America Inc., James Farrell & Co., Inc. and Leprino Foods Company Inc.accounted for 3.6% of the total in the 12 months to June 30 after a 44.2% surge in the last quarter. China accounted for 4.3% share of U.S. dairy exports.
Busan an unlikely loser from the trade war
Traffic at the port of Busan in South Korea declined as a result of reduced transiting shipments from China to the U.S. The port had seen a surge in shipping in December 2018, likely due to a pre-tariff acceleration in traffic.
U.S. seaborne imports from China routed through Korea fell 9.3% year over year in July, Panjiva data shows, following a 7.6% slide in the second quarter of 2019.
In addition, market share with A.P. Møller - Mærsk A/S and MSC Mediterranean Shipping Co. SA potentially may have suffered a respective year-over-year drop of 24.2% and 28.8% in China-to-U.S. routings via South Korea. Ocean Network Express likely saw an 18.4% rise in shipments.
American port activity helped by May's US-China trade talks breakdown
The U.S.-China trade war has yet to take a major toll on U.S. seaports’ activity, with inbound traffic from all origins having increased 2.4% year over year in July.
The rise may reflect accelerated imports to build inventories after U.S.-China trade talks failed in May. The West Coast ports broadly did better than the East Coast. Shipments from Seattle-Tacoma and Los Angeles were up 5.9% and 5.8% respectively while New York’s fell 0.1%.
At first glance the slower growth on the East Coast limited the growth in demand for transits of the Panama Canal, which increased 0.3% year over year. Yet, there was a 13.3% surge in neopanamax transits, suggesting that shipping patterns, as well as demand, are changing.
Cabinet case shows complexities of multilayered tariff judgments
The U.S. Commerce Department has made an initial determination that Chinese exports of wooden cabinets have received subsidies. That comes on top of section 301 duties that were increased to 25% in May.
A final decision — due in early 2020 alongside a parallel antidumping case — could include a currency devaluation element depending on ongoing U.S.-China negotiations. U.S. imports have declined, but not collapsed, as a result of the case with a 13.5% year-over-year slide in the second quarter and an 11.3% drop in July, Panjiva data shows.
The suppliers cited in the case have followed different strategies with Dalian Meisen appearing to increase its exports to the U.S. by 21.8% year over year in the three months to July 31, while shipments associated with Ancientree were unchanged. Both are subject to much lower duty rate assessments than Deway International, whose shipments may have fallen by a third.
Semiconductors help Philippines avoid Asia's falling export fate
International trade activity in the Philippines fell 5.8% year over year in June, largely due to a slump in imports of commodities and manufactured items. Exports managed to rise 1.5% as a result of a 4.1% increase in semiconductor exports, which likely included those from Texas Instruments Inc. and STMicroelectronics NV.
That allowed the Philippines to outpace Asia more broadly with regional exports down 3.8% year over year in June.
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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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