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DSV diversifies, leads forwarders; UK lines up Brexit tariff defense


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DSV diversifies, leads forwarders; UK lines up Brexit tariff defense

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 diversifies shipping volume, leads forwarders in February
The freight forwarding industry saw a 4.4% year-over-year decline in volume on U.S.-inbound seaborne routes in February. The reversal in fortune affected 19 of the top 20 shippers, with United Parcel Service Inc. suffering the most significant decline, with a 16.3% drop, followed by Deutsche Bahn AG's 15.5% slide. The outlier was DSV A/S, with volume that climbed 6.4% year over year.

DSV's strategy appears to include diversifying volume away from its largest lanes of China to the U.S. and Germany to the U.S. Imports from Europe, excluding Germany, climbed 17.3%, offsetting the 6.5% drop in shipments from China. The China fall was due to the earlier lunar new year and the end to pre-tariff inventory front-loading. The diversification strategy also comes as DSV attempts to complete its acquisition of Panalpina Welttransport (Holding) AG, which saw a 1.5% fall in total volume in February.

(Panjiva Research - Logistics)

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UK's post-Brexit tariff defenses aim to minimize disruption
The British Parliament has passed two of three hurdles needed to delay Brexit. That does not mean a no-deal exit is off the table in the medium term nor that a free trade deal with the EU can be achieved.

In the meantime, the U.K. government issued a post-Brexit tariff code. Panjiva's analysis of 10,233 tariff categories shows 979 lines are not zero rated, indicating a desire by the government to minimize disruption. Yet, that gives away negotiating leverage ahead of future trade deals. The auto sector has the lowest proportion of duty-free tariff lines — 58.4% of the total — while the apparel sector has a wide range of 12% tariff rates across men's and women's clothing.

The tariff on apparel may have been instituted in response to the growth in imports of clothing and footwear from the EU. This reached £9.26 billion of shipments after a 7.2% year-over-year rise in 2018 versus a 5.2% drop in supplies from the rest of the world.

(Panjiva Research - Policy)

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Late U.S.-Mexico-Canada Agreement ratification could bring auto tariff chaos
Slow progress on ratification of the U.S.-Mexico-Canada Agreement raises the risk that a carve-out for Mexico and Canada from America's pending section 232 tariffs on the automotive industry may not be applied. President Donald Trump has to make a decision on those duties by May 17.

The delays come as Mexican exports of cars and light trucks fell 0.1% year over year in February, led by a drop in shipments by Fiat Chrysler Automobiles NV and General Motors Co. In contrast, Volkswagen AG, which has a lower exposure to the U.S. and, hence, any new tariffs, saw an increase in exports. The U.S. accounted for 55.5% of VW's exports in the 12 months to Jan. 31 versus 74.0% for Fiat Chrysler and 81.2% for GM.

(Panjiva Research - Autos)

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Adidas predicts supply chain challenges, leans harder on Vietnam
Adidas AG CEO Kasper Rorsted expects sales growth in 2019 to be restricted by up to two percentage points as a result of apparel supply chain challenges "predominantly related to North America in the first two quarters." The company's U.S. seaborne imports have yet to reflect that challenge after increasing 26.0% year over year in the first two months of 2019 following a more modest 1.2% rise in the prior two months. Adidas relies on increasing shipments from Vietnam, which accounted for 46.0% of its apparel imports in the 12 months to Feb. 28.

(Panjiva Research - Apparel)

BP's new fuels carry significant costs for shipping lines
Oil refiner BP PLC launched its range of International Maritime Organization-compliant shipping fuels ahead of the implementation of new sulfur emissions regulations in 2020. Shipping lines face a significant increase in costs in 2020, given the new fuels cost $188 per ton, or 45.2% more than high-sulfur fuels, according to S&P Global Platts data. Shipping firm CMA CGM SA has said that each $10 per ton increase in fuel costs, excluding price rises, could cut profitability by $84 million. That would suggest an unmitigated fuel cost increase could cut profit margins by 6.4 percentage points versus its 4.9% EBITDA margin in 2018. For container lines that already are wrestling with falling profitability, such as Hapag-Lloyd AG and Hyundai Merchant Marine Co. Ltd., passing through higher costs to consumers will be more important than ever.

(Panjiva Research - Logistics)

New York looks to cement gains with Portland, Wilmington barge services
The Port Authority of NY/NJ may launch barge services for onward shipment of containers by year-end 2019 to help reduce congestion. A.P. Møller-Mærsk A/S' APM Terminals already has used local barge shipments after imports to New York climbed 12.8% year over year in 2018. The new services would head further afield to Wilmington, Del., and Portland, Maine. The move is somewhat curious given only 1.7% of shipments landed at New York complete their journeys in the regions around Wilmington and Portland. An alternative explanation is that the service is designed to attract volume that otherwise would have landed at Philadelphia and cement New York's regional dominance.

(Panjiva Research - Logistics)

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. S&P Global Market Intelligence is not responsible if those links are unavailable later.

S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.