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.
Maersk sees trade conflict spreading, Danish discipline needed
Container-line A.P. Møller - Mærsk A/S reported improving profitability in the first quarter with an EBITDA margin of 13.0%, compared to 10.0% a year earlier. That was the result of cost cutting offsetting a 2.2% drop in container volumes handled. Maersk's result was above Hapag-Lloyd AG's 12.7% and well ahead of smaller operators including ZIM Integrated Shipping Services Ltd. at 8.0%.
Yet, the outlook is not bright. CEO Soren Skou has indicated the firm as "zero intent" to start a round of rate reductions versus other shipping firms despite the "risk from trade war" in 2019. Indeed, the firm's U.S.-inbound volumes fell 2.1% year over year in April compared to an industrywide 4.5%.
Skou also flagged that China, which represented 31.2% of Maersk's U.S.-inbound shipments in the 12 months to April 30, is not the only risk for global shipping volumes. Shipments from Europe, which represented 23.0% of Maersk's total, could also be impacted by rising protectionism, with the U.S. "turning its attention to Europe" according to Skou.
CH Robinson sticks to its bolt-on strategy in Italy as China freight wanes
C.H. Robinson Worldwide Inc.'s acquisition of Italian trucking firm DEMA SERVICE SpA will help the freight forwarder diversify its revenues and offer a more integrated Europe-to-Global logistics service. Both are needed given CH Robinson's exposure to the slowing China-to-U.S. business.
The latter represented 63.6% of CH Robinson's U.S. seaborne inbound shipments in the 12 months to April 30, and had already dropped 13.9% year over year in April.
The largest CH Robinson customer in Italy-to-U.S. seaborne shipping — which may benefit from the wider service offering — was Bacardi Ltd., with 680 TEUs shipped in the past 12 months. Others include the local subsidiaries of engineering firms SACA Precision Guangdong SACA Precision Manufacturing Co. Ltd. and Donaldson Co. Inc.
Trump, Abe should wrestle with cars to reach a meaningful deal
President Donald Trump and Prime Minister Shinzō Abe held a series of political and social meetings — including over sumo wrestling — but have yet to reach formal trade deal. Agriculture remains "very much in play" according to the White House, making a deal ahead of Japan's elections in July very unlikely.
Talks will likely focus on reducing the U.S.'s $67.8 billion trade deficit with Japan, which represents 7.4% of the global total. The centerpiece for negotiations needs to be the automotive sector rather than agriculture.
Bilateral automotive trade reached $59.0 billion in the 12 months to March 31, but the sector accounted for 80.6% of the U.S. trade deficit with Japan. Arguably, the Trump administration's section 232 "national security" review of autos matters more than the wider trade negotiations.
May gone in June, Brexit needs to fall into place by October
The resignation of British Prime Minister Theresa May and the EU elections introduce another round of uncertainties to the Brexit process. May's replacement will be unknown until after June 7 and will be a major factor in the direction of Brexit decision-making.
The potential for a general election remains marginal while all the options ranging from a no-deal Brexit through remaining in the EU remain in place ahead of the Oct. 31 decision deadline. In the meantime, British trade with the EU surged 16.1% higher year over year in March due to stockpiling.
The EU also faces political challenges following the Parliamentary elections — the complexion of the new European Commission will drive the latter stages of Brexit but remains highly uncertain. It is perhaps not a surprise that German export confidence fell to a net 0.9% positive in May, the lowest since October 2012, while French sentiment languishes at similar levels to June 2016 when the Brexit referendum was held.
Mexico's trade success brings risk of Trump's ire
Mexico's international trade bucked the global trend with 3.8% year-over-year growth in April, including a 7.5% surge in exports excluding petroleum products. Exports to the U.S. were particularly strong with an 11.7% rise which was driven by 15.9% jump in automotive exports despite declining sales of cars and light trucks.
Imports from the U.S. rose by just 2.7%. As a consequence, the 12-month trailing trade surplus reached a record $86.8 billion. This may be taken as a sign of "unfair" trade by the U.S., raising the risk of a deterioration of relations despite the recent rapprochement regarding metals tariffs and the near-completion of the U.S.-Mexico-Canada Agreement.
World trade recovery in March will prove fleeting
Global trade volumes rose 1.2% year over year in March according to CPB World Monitor data, driven by a 2.0% increase in exports. That is likely to be a fleeting improvement given it was principally down to a one-off surge in exports from China.
Preliminary data for April indicates there has been a marked turnaround with 13 of the 16 countries that have so far submitted figures seeing lower exports. That includes a 2.3% year-over-year drop from China, while maritime exports from the U.S. fell 3.6%.
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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