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Attack on Saudi oil facility may have limited US impact; Hapag-Lloyd feels pain

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Attack on Saudi oil facility may have limited US impact; Hapag-Lloyd feels pain

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.

Attack on Saudi oil facilities may have limited direct impact on US
An attack on Saudi Aramco's oil facilities at Abqaiq and Khurais could cut 5.7 million barrels of oil per day from the global oil market, according to the company, leading the Trump administration to allow the release of oil from the Strategic Petroleum Reserve. In the context of the U.S. market, Saudi Arabia is relatively minor, accounting for 6.9% of imports in the 12 months to July 31, according to Panjiva. The U.S. also exports oil equivalent to 6.3x its imports from Saudi Arabia.

The availability of precise oil grades may be a challenge for individual U.S. refiners, not least Saudi Aramco's own refining division, Motiva, as well as refineries in California. Panjiva's shipping data shows there were shipments associated with the firm were equivalent to 6.7 million tons of imports in the 12 months to Aug. 31.

Other major importers of Saudi oil to the U.S. over the same period were Marathon Oil Corp., Phillips 66 and Exxon Mobil Corp., though each was less than one third the size of Motiva's shipments. Chevron Corp.'s Californian refineries may also face challenges given their reliance on oil imported by sea.

(Panjiva Research - Energy)

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Hapag-Lloyd feels the pain of trade war with lower volumes, delayed rate rise
Hapag-Lloyd AG has postponed an increase in its peak season surcharge on shipping rates from Asia to the U.S., potentially in relation to the drag of tariffs on Chinese exports. That has followed a 0.7% slip in China to U.S.-West Coast rates on Sept. 12 versus July 1. Lackluster demand growth in U.S. seaborne, inbound shipping in August of just 0.2% year over year brings the three-month average to a rise of just 0.1%, the lowest rate since June 2016.

Hapag-Lloyd has seen a reversal in fortunes in its U.S. inbound volumes with a 0.5% year-over-year drop in August after a 4.1% rise in the prior three months. The main culprit has been a 6.8% drop in shipping from China alongside a growth in shipments from Europe of just 0.3%. Among the other container-lines MSC Mediterranean Shipping Co. SA and A.P. Møller - Mærsk A/S have posted a 5.6% and 3.8% decline respectively in August, while Evergreen Marine Corporation (Taiwan) Ltd. has been the best performer with a 5.8% improvement.

(Panjiva Research - Logistics)

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Pernod Ricard, LVMH turn to US drinkers after building Brexit bubble
French wine exporters have prepared the Champagne market for Brexit by having "overstocked in Great Britain to fill a possible border closure," according to the CIVC industry association. French exports of sparkling wine to the U.K. jumped 60.8% year over year in the first quarter ahead of the original Brexit date and rose by a further 16.8% in July.

Yet the U.S. is an increasingly important market, accounting for 20.4% of global Champagne exports in the 12 months to July 31. French vintners face tariff risks if EU-U.S. relations break down further, with French sparkling wines representing 56.8% of the $1.33 billion U.S. import market in the 12 months to July 31.

Panjiva's shipping data show the largest Champagne-focused exporters to the U.S. include Pernod Ricard SA, shipments associated with which jumped 89.3% in the three months to Aug. 31, while those associated with LVMH Moët Hennessy - Louis Vuitton Société Européenne rose just 2.9%.

(Panjiva Research - Consumer Discretionary)

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Tariff burden sharing by Chinese exporters rising as US import prices fall
U.S. trade price deflation continued in August with headline imports down 2.0% year over year and export prices having fallen by 1.4%, according to the U.S. Bureau of Labor Statistics. The import price deflation was widespread with imports from Latin America down 2.3% while those from China fell 1.6%. The latter may be down to tariff-related burden sharing.

Import prices for chemicals from China — where 25% tariffs have been applied since July 2018 — dropped 11.8% year over year. Prices for furniture, where duty rates were increased to 25% from 10% in May, dropped by 1.9% compared to a 0.9% decline in July.

In aggregate the dollar value of the price deflation was equivalent to 21.7% of the increase in duties on imports from China. While an imperfect measure that would suggest burden sharing reached over a fifth of tariffs from 18.8% in July, indicating that pressure on Chinese exporters is increasing.

(Panjiva Research - Policy)

Dollarama imports surge, worries about trade war's impact on innovation
Canadian retailer Dollarama Inc. sees the U.S.-China trade war "not so much a cost issue as a new item issue," according to CEO Neil Rossy, as suppliers focus on realigning their supply chains rather than on innovation. Dollarama may be taking advantage of surplus capacity in China to supply its Canadian shops via the U.S. — seaborne shipments associated with the firm jump 85.1% year over year in July and August after a 59.7% surge in the second quarter.

Growth has been fastest in plastic products and furniture where tariffs have been applied since September 2018. Yet shipments of toys have also climbed by 23.6% ahead of tariffs from Dec. 15, suggesting Dollarama is growing even putting aside tariff effects.

(Panjiva Research - Retail)

COSCO keeps clear of California's nightmare August
California's major seaports struggled in August — in particular Long Beach, which recorded a 2.3% year-over-year drop compared to a 4.2% rise in traffic through Los Angeles, according to data from the Port of Long Beach. Long Beach's woes were due to a 5.9% slide in imports, partly related to a 48.5% slump in shipments by Hapag-Lloyd and Ocean Network Express combined as well CMA CGM SA's, which fell 27.4%.

While the downturn can be explained by the U.S. China trade war it was COSCO SHIPPING Holdings Co. Ltd. that did best with a 9.4% improvement in shipments inbound to Long Beach. Across California's ports, including Oakland, there has also been a slippage in exports — again likely due to the trade war — with a 2.8% year-over-year slide.

(Panjiva Research - Logistics)

Global trade's summer sun already fading
Asia's exports staged something of a recovery in July with total exports from 15 countries having risen by 0.4% year over year after a 2.6% slump in the second quarter. When combined with a 1.3% recovery in exports from the EU that meant global exports across 37 countries grew 0.2%, the first monthly improvement since January.

Yet Asia's gain in July was largely down to China, which has since posted a 1.0% drop in exports in August. Indeed, six of the nine countries that have reported August data have already shown a drop in exports — the recovery is proving short-lived.

(Panjiva Research - Economics)

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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