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Deckers, Wolverine stockpile shoes; PriceSmart, Hyundai face Dorian's fury

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.

Deckers, Wolverine show signs of stockpiling ahead of shoe tariffs
The Footwear Distributors and Retailers of America association has criticized the Trump administration's application of tariffs at a 15% rate on imports of footwear from China from Sept. 1. The FDRA estimated that they could lead to a potential $4 billion annual cost for consumers.

As well as price rises, importers may already be switching supplies to other countries. China accounted for 51.7% of U.S. footwear imports in the 12 months to June 30, down from 62.8% in 2015 as imports from Vietnam increased.

Major importers have shown signs of stockpiling in July, likely due to an earlier failure in U.S.-China negotiations in May. Panjiva data shows shipments of shoes from China associated with Deckers Outdoor Corp. — the maker of Ugg and Hoka brands — rose 34.0% year over year in July after a 6.2% slide in the second quarter. Similarly, imports from China linked to Wolverine World Wide Inc. — the brand-owner for Merrell and Hush Puppies — climbed 23.8% in July after a 1.9% drop in the second quarter.

(Panjiva Research - Apparel)

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PriceSmart, Hyundai Mobis face Dorian's fury
Tropical Storm Dorian may strengthen into a category 4 hurricane and could make landfall around Palm Beach, Fla., in the next few days, according to the National Hurricane Center — though there are still lots of uncertainties in that forecast. Shipping into Palm Beach and Miami typically has a lull in September. For example, it dropped 18.8% versus August in 2018.

Yet, there's been 15.4% year-over-year growth in shipments to the two ports year-to-date, raising the risk of post-storm congestion challenges. Imports to the two ports are led by shipments from Central and South America, which accounted for 47.1% of inbound traffic in the 12 months to July 31, while much of the growth is driven by shipments from Europe.

Panjiva data shows major importers to the 300 kilometers area around Miami via the two ports in August and September 2018 included retailer PriceSmart Inc., auto-parts supplier Hyundai Mobis Co. Ltd. and a variety of consumer goods suppliers.

(Panjiva Research - Logistics)

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Codelco, BHP suffer Chilean copper corrosion on lower prices, strike
Concerns about the state of the world economy have driven global copper prices down, in turn cutting royalty payments for governments including Chile's. That has led to the application of a stimulus package in Chile, the need for which was increased by a copper mining strike at Codelco's operations.

The impact of that strike can be seen in a 37.9% year-over-year drop in copper cathode exports associated with Codelco in the second quarter, Panjiva data shows. That was the result of exports in June having reached their lowest since July 2016. BHP Group has fared little better with a 27.8% year-over-year decline, with the result that total Chilean cathode exports likely fell 22.5% in dollar terms.

(Panjiva Research - Metals & Mining)

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Zoom loses out as tariff exemption process crawls
Requesting exemptions from U.S. tariffs on Chinese exports remains a widespread strategy for companies, though the process is slow and has a low likelihood of success. Panjiva analysis of more than 24,500 filings shows 25.2% of requests for list 1/2 tariff relief — where duties were applied in July and August 2018 — have been granted. Reviews of requests for exemptions from list three tariffs — applied in September 2018 and increased in May — have had a success rate of just 13.8%.

Zoom Telephonics Inc. accounted for 18 of the 94 list three denials so far for its network routers and modems. Total U.S. imports of those products by all manufacturers fell to $2.78 billion in the second quarter from $3.76 billion in the last quarter of 2018. Shipments from China fell to 21.1% of the total from 45.3%. Imports from Mexico rose to 28.4% of the total and may have included shipments by Flex Ltd. and Hon Hai Precision Industry Co. Ltd.

(Panjiva Research - Tech. Hardware)

Hikvision stockpiles cameras before double whammy of US ban and tariffs
Chinese security camera maker Hangzhou Hikvision Digital Technology Co. Ltd. has had to deal with U.S. security sanctions and tariffs on Chinese imports over the past year. The former have taken effect from Aug. 13 and may have triggered a period of stockpiling in July.

Panjiva data shows seaborne imports associated with the company jumped 90.6% year over year in July after an 8.3% decline in the second quarter. The firm directly imports 59.2% of those imports for onward distribution, with outside consignees representing the remainder.

Those consignees have been cutting their imports, with imports associated with LT Security down 64.1% year over year in the three months to July 31 while Hunt Electronics' may have declined 21.1%.

(Panjiva Research - Tech. Hardware)

Accelerating slide in US trade shows impact of tariff war, waning confidence
U.S. international trade-in-goods activity fell 1.3% year over year in July, accelerating from a 0.7% decline in June. With imports and exports down by a similar amount, the trade deficit — the Trump administration's preferred trade metric — fell for the first time since February on a year-over-year basis.

The 1.2% decline in imports was due to a 10.7% slide in industrial supplies and a 4.4% slippage in capital goods — both are subject to the widening tariffs applied to Chinese exports. One concerning trend in the data is the slowdown in trade in capital goods, which is a barometer for industrial investment. Combined imports and exports in the sector fell 3.1% in July after a 2.9% decline in the second quarter and a 1.6% rise in the first quarter.

(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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