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May holds the key to March; potential losers from Venezuela sanctions

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May holds the key to March; potential losers from Venezuela sanctions

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.

May holds the key to March as Brexit options bifurcate
The next vote in British Parliament regarding Brexit is scheduled for Jan. 29. Should a compromise regarding the existing withdrawal agreement not be reached — which is reportedly unlikely the choices split between a no-deal Brexit and a delay or cancellation. The former is the default and the latter would prove complex.

Prime Minister Theresa May seems set against restarting the clock — by withdrawing and reapplying Article 50 — or launching a new referendum. Yet, a delay needs agreement of the other 27 EU states.

British importers may be leaving precautionary stockpiling late. U.K. imports from the EU are up 2.2% year over year in the three months to Nov. 30, compared to 5.9% for imports from outside the EU. At a product level, there are signs of accelerating shipments of pharmaceuticals and basic materials including fuel.

(Panjiva Research - Policy)

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Brexit opportunity for Intas and Aurobindo
A no-deal Brexit could accelerate the trend of U.K. companies increasing purchases from outside the EU. Pharmaceutical companies including Novo Nordisk A/S and Sanofi have warned of shortages in the event of a withdrawal agreement and related customs arrangements are not finalized. That may explain why British imports of medicines recorded a 2.4% year-over-year rise after an average 13.2% decline in the prior three months.

Supplies of pharmaceuticals from outside the EU are already increasing. For example, imports from India climbed 15.8% in the 12 months to Nov. 30, 2018. But Indian pharma imports represent 1.9% of the total. It could provide a significant growth opportunity for Intas Pharmaceuticals Ltd. and Aurobindo Pharma Ltd., the largest Indian exporters to the U.S.

(Panjiva Research - Healthcare)

Venezuela sanctions could cause problems for Chevron, Valero
The U.S. government may be considering applying sanctions against Venezuelan oil exports after opposition to them from the White House subsided. Previous plans, floated by Secretary of State Mike Pompeo in June 2018, had been shelved due to concerns about the impact on the Venezuelan economy and the government's ability to buy food.

The consideration comes as U.S. seaborne oil imports from Venezuela's Petróleos de Venezuela SA have started to recover, with a 33.9% year-over-year surge in the fourth quarter of 2018. That was largely down to a 128.7% jump in imports by Chevron Corp. — Venezuela is its third-largest source of seaborne supplies after the U.S. and Mexico — while imports by Valero Energy Corp. climbed 37.0%.

(Panjiva Research - Energy)

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CMA-CGM's ACSA service may hit a speed bump in Mexico
CMA CGM SA has restructured its ACSA-1 container-line service that runs from eight Asian ports to the Mexican ports of Manzanillo and Lazaro Cardenas to include an extra loop at the Asian end. Service optimization is an increasingly important part of container-line strategies.
The move comes after a 17.2% year-over-year surge in shipments between the eight Asian ports and two Mexican ports in the three months to Nov. 30, 2018.

The future may be more challenging. Imports by six large automakers using the Mexican ports, led by Mazda Motor Corp. and Nissan Motor Co. Ltd., fell 20.2% over the same period due to weak U.S. auto sales. They could fall further as the U.S.-Mexico-Canada trade deal comes into effect, encouraging manufacturing in Mexico rather than overseas.

(Panjiva Research - Logistics)

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Indian rice may need more export subsidies to stay on the boil
Competition between Asian rice exporters is growing after the Indian government applied a 5% export subsidy in late 2018. Indian rice exports have expanded with U.S. seaborne imports having grown 16.2% in the fourth quarter of 2018 versus a year earlier. That only kept pace with shipments from Thailand. Additionally rough rice prices fell 13.9% in December 2018 from May's peak, indicating competition has become more aggressive. The most important markets for Indian rice exporters are in the Middle East, with Iran accounting for 15.2% of exports in the 12 months to Oct. 31, 2018. The export industry is fragmented with the largest exporter, Supple Tek, having a 7.2% of the market, so government support looks set to continue ahead of the general elections this year.

(Panjiva Research - Agriculture)

Huawei accelerates equipment imports as investigation looms
The U.S. Justice Department is reportedly investigating electronics manufacturer Huawei Technologies Co. Ltd. on intellectual property theft grounds. A finding against the firm could restrict Huawei's operations in the U.S. So far the import impact has been minimal. The firm's U.S. seaborne imports to the U.S. have been concentrated on the supply of telecoms equipment to its local research and development subsidiary. A 142% surge in seaborne imports to the U.S. in the 2018 fourth quarter to reach a record high would suggest the company may already be anticipating problems.

(Panjiva Research - Tech. Hardware)

Christopher Rogers is a senior researcher at Panjiva, which is part of S&P Global Market Intelligence. 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.

The Supply Chain Daily has an editorial deadline of 7:30 a.m. ET. Some external links may require a subscription. Links are current at the time of publication time. S&P Global Market Intelligence is not responsible if those links are unavailable later.