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.
DSV outpaces CH Robinson with less China exposure, faster European growth
The global freight forwarding sector saw weaker revenues but improved profitability in the second quarter. C.H. Robinson Worldwide Inc.'s revenues fell 8.6% year over year — 2.5% points lower than analysts expected — but saw an increase in its EBITDA margin to 6.5% from 5.6% a year earlier due to cost cutting. DSV A/S meanwhile saw revenue growth of just 3.0%, which was also 2.5% worse than analysts' forecasts. It also saw increased profitability due to a stronger ocean freight business.
The outlook is less certain with CH Robinson's CEO, Bob Biesterfeld, stating, "We expect the soft freight environment to continue through the balance of 2019." The two firm's relative exposure to China is one reason for their different revenue performance. China represented 60.6% of CH Robinson's U.S. seaborne, inbound freight during the quarter after a 15.5% yearly decline, according to Panjiva data. For DSV, it accounted for 29.2% and fell just 5.5%.
Should U.S.-China trade relations not improve, both may have to rely more on European traffic, where DSV is both more exposed. DSV's shipments from Europe grew more quickly in the second quarter at 30.7% year over year, compared to CH Robinson's 11.9%.
Cannondale's catching the pack with new models; Giant shrinks
Bicycle maker Cannondale Bicycle Corp., controlled by Dorel Industries Inc., has revamped its product line, adding the SystemSix aerodynamic bike and Treadwell city model to try and take market share from competitors include Roth Distributing's Trek and Specialized Bicycle Components Inc. That has come as a fall in U.S. bike imports has accelerated, with imports down 14.6% year over year in the three months to May 31 and by a further 22.9% in June in terms of seaborne imports, Panjiva data shows.
The decline is partly due to tariffs on Chinese imports, which represented 60.0% of the total in the 12 months to May 31. Cannondale has been able to buck the trend of falling imports with a 61.8% year-over-year expansion in seaborne shipments in the second quarter. That is faster than Specialized's 7.1% improvement while Trek and Giant Manufacturing Co. Ltd. have seen declines of 3.1% and 21.7%, respectively.
South Korea's slump powered by semiconductor slide, Japan feud
South Korea's international trade activity fell 7.2% year over year in July with exports down 11.0% and imports off by 2.8%, Panjiva analysis of official data shows. That is the eighth straight month of declines in the aggregate. The semiconductor sector alone accounted for around half the dollar decline in exports, with a 28.1% year-over-year drop from 26.7% in the three months ending June 30.
The emerging trade war with Japan would not have helped matters with South Korean imports of specialty chemicals — including sanctioned semiconductor etching chemicals from Japan — down 39.4% year over year and total imports having declined by 9.4%.
Other sectors contributing to the total South Korean export drop include steel, down 21.9%, and PCs, phones and TVs which fell 24.5% on a combined basis.
Aurobindo, Cadila may be losers in surging Canada-to-US drug trade
The U.S. government will implement new policies to provide a "safe linkage between drug supply chains" between Canada and the U.S. That is designed to cut the costs of pharmaceuticals in the U.S. Legitimate imports from Canada were worth $4.3 billion in the 12 months to May 31 after a 30.0% surge in imports compared to the prior 12-month period, Panjiva data shows. That is still only 5.5% of the total, which in turn increased 8.8% in the past 12 months.
The fastest-growing drug import classes were cardiovascular treatments, which grew 42.9% year over year in the three months to May 31 and antidepressants which climbed 22.8% higher. The new rules are designed to cut the cost of on-patent drugs, but could pressure imports of generic drugs — whose main attraction is their cost.
That comes as exports from India — a leading supplier of generics — fell 19.5% year over year globally in the three months to April 30. That may lead exporters — the largest of which include Aurobindo Pharma Ltd., Cadila Healthcare Ltd. and Dr. Reddy's Laboratories Ltd. according to Panjiva's India dataset — to increasingly look for sales outside the U.S.
Wind tower dumping case brought after gust of imports
The U.S. government received six new petitions to investigate trade policy violations in June, bringing the year-to-date total to 42 from 43 a year earlier. This figure also includes 12 anti-dumping cases this year, down from nine in the previous year. There may be more awaiting a resolution to the China trade negotiations and automotive tariff reviews.
The latest case relates to the wind power turbine towers imports from South Korea and three other countries. Imports from South Korea have led the way with $139 million worth of shipments in the 12 months to May 31 out of a total $379 million, Panjiva data shows.
South Korean exporters have increased their shipments by 56.5% year. On the basis of Panjiva's assessment of seaborne shipments of the products covered by the case, CS Wind Corp. and Dongkuk Structures & Construction Co. Ltd. may be included. The case could take a year to resolve, potentially coinciding with a downturn in demand for wind turbine equipment.
An (updated) roadmap for the US-China trade war
The U.S.-China trade war is nearly two years old with a tentative pause in the escalation of hostilities. A pause in further tariff increases following a G-20 meeting at the start of July 2019 between presidents Donald Trump and Xi Jinping included commitments to no further escalation and increased Chinese agricultural purchases.
Talks at the end of July have potentially unlocked $1.5 billion of sorghum, corn and pork purchases, as well as a commitment to enter more detailed talks in September, according to Panjiva's data analysis.
Supply chains are not out of the woods, however. The trade war has become increasingly politicized as the U.S. presidential election process gathers pace and China will unlikely be willing to give significant ground ahead of the 70th anniversary of the People's Republic in October. That coincides with the peak shipping season that reaches a crescendo from August to November.
(Panjiva Research - Policy, updated from original July 1, 2019, report)
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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