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.
TNT's failings blow up FedEx's profitability
FedEx Corp. reported a rise in fiscal second-quarter revenue to end-November of 9.3%, a slowdown from previous quarter for which it blamed the European business (formerly TNT). The weakness in Europe can be seen in FedEx’s U.S. seaborne imports, with November shipments from Europe falling 19.8% year over year. In contrast, shipments from China rose 12.9%.
However, China may become problematic. The country, which represented 61.2% of volumes in the 12 months to Nov. 30, may face tariff restrictions from March 2019.
In its second quarter, FedEx saw profitability drop year over year, with its EBITDA margin falling to 12.1% from 13.1% a year earlier despite reduced fuel costs. It marked the eighth consecutive quarter of falling profitability. The company has launched a cost-cutting program, though the decline bodes ill for the freight-forwarding sector more broadly.
Maersk, MSC dominate US shipping, CMA-CGM loses power
Container lines operating U.S.-inbound services saw a slowdown in growth in November, with total volumes rising just 3.8% year over year, compared to growth of 7.9% in the prior three months on average. That reflects a mixture of lower shipment growth from China due to increased tariffs as well as a downturn in shipping from Europe. CMA CGM SA saw the most marked slowdown, with a 3.5% drop in volumes.
The 2M Alliance of MSC Mediterranean Shipping Co. SA and A.P. Møller - Mærsk A/S increased its market share after the shippers grew 13.9% and 11.5%, respectively in November versus a year earlier. The two liners' superior growth may lie in the diversity of their offerings. The growth of their shipments from China actually accelerated while imports from ports in Asia outside China surged 19.3% in November.
Hunters win from tariff exemptions, 82% still awaiting a response
The window allowing companies to request an exemption from the U.S. tariffs applied to Chinese exports in July and August closes on Dec. 20. As of Dec. 14, 1,352 companies across 909 product categories submitted 11,769 requests. Only 5.6% of requests have reached the penultimate stage for approval while a further 12.6% have been denied. There is no fixed timetable for dealing with the remaining 81.8% with products being reviewed by type.
For example, water pumps — where imports from China were worth $1.4 billion in the 12 months to Oct. 31 — have mostly been granted exemptions. The process may also favor consumer-type products. In one case, Johnson Outdoors Inc. received an exemption for laser-sights used on rifles. Total U.S. imports from China across all importers were worth $267 million in the 12 months to Oct. 31, but had fallen by 67.0% in the three months to Oct. 31 from the previous three months.
Uber cannot get over tariffs, asks for an e-bike exemption
Uber Technologies Inc. joined over 1,300 companies in requesting an exemption from U.S. tariffs on Chinese exports. The request specifically relates to 25% duties applied in August to electric bikes. The firm faces a long wait to know whether its request gets the green light, as only 18.2% of requests have been assessed and most of those have been denied. While Uber said tariffs have cut investment and raised prices, there has been little impact on imports. In the three months to Oct. 31, there was a 220.4% jump from the previous three months in e-bikes shipments by all importers from China, although seaborne shipments may have dropped in November. Total U.S. imports of e-bikes reached $380.1 million in the 12 months, with China accounting for 77.0%.
Dell proves dynamic, Lenovo reboots as tariff threat powers down
U.S. laptop computer sales may suffer a fourth year of contraction after imports in the three months to Nov. 30 fell 0.1% year over year. Shipments in September and October had surged, potentially because importers anticipated the implementation of tariffs on Chinese exports. That risk has now been delayed until at least March as trade talks continue. The computer firms are pursuing a variety of strategies. Dell Technologies Inc.'s imports increased 65.0% — its peak sales came earlier in the year, which means it may have been stockpiling ahead of tariffs. Lenovo Group Ltd.'s 69.5% rise may reflect inventory building for the launch of the revised ThinkPad line, while HP Inc.'s 9.2% drop may be a truer reflection of underlying industry trends.
Japan's export slowdown reflects more than just the trade war
Japan’s trade growth slowed to 6.2% year over year in November, from 9.3% on average in previous few months. That was mostly accounted for by an increase of 0.1% in exports. While such a slowdown has not been unusual in Asia — China, India and South Korea all saw reduced export growth in November — Japan’s deceleration was sharper. Imports of semiconductors fell 0.1% and auto-parts 3.7%, indicating a slowing in industrial supply chain activity globally. Exports to both China and the U.S. increased, albeit modestly, suggesting their bilateral trade war was not a major driver.
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.
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