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.
Stockpiling for now, Vietnam for later as US seaborne supply chains evolve
U.S. seaborne imports returned to growth in July with 1.5% increase year over year after a 2.5% decline in June. Imports from China continued to slide with a 3.0% reduction compared to a 3.3% fall in the second quarter. That was offset by an increase in shipments from Asia excluding China, which climbed 11.5% as companies switched sourcing to Vietnam — imports from which rose 28.5% to a record number of shipments — as well as India and Thailand where imports climbed 17.6% and 16.0%, respectively.
There are signs of stockpiling in consumer goods as a response to the May breakdown in U.S.-China talks, rather than the more recent announcements from U.S. President Donald Trump at the end of July. Stockpiling likely drove a 7.5% year-over-year increase in apparel imports from all countries in July as well as an 18.5% surge in imports of toys. Shipments of electrical and electronics items increased 2.5% in July after a 2.3% fall in the second quarter, likely reflecting concerns about tariffs for consumer electronics devices including laptop PCs.
With tariff increases due Sept. 1, there's not enough time to boost sea freight, forcing importers to consider air freight. It's worth noting that seaborne imports peak in August for back-to-school products and November for holiday shopping products.
Hapag-Lloyd resists the trade war's pull
Container-line Hapag-Lloyd AG reported a 13.1% year-over-year improvement in second-quarter 2019 revenues. That was driven mostly by better shipping rates — volume growth was just 1.7% — which resulted in an improvement in profitability to 11.0% at the EBITDA line from 7.3% a year earlier.
An expansion in volumes is unlikely to help later in the year due to "active capacity reduction in intra-Asia trade," according to the company's outlook. While the U.S.-China trade war wasn't mentioned specifically by Hapag Lloyd, Panjiva data shows Hapag-Lloyd's China-to-U.S. volumes fell 11.9% year over year in the second quarter and by a further 2.3% in July.
That's been offset by a surge in growth from Asia excluding China with the result that Hapag-Lloyd's second-quarter volume growth on U.S.-inbound routes reached 5.0%, rising to 7.8% in July.
Panjiva Insights: The global trade war's impact and the road ahead
Panjiva held a webinar on Aug. 7 that addressed the impact of the trade war between the U.S. and China on corporate supply chains. Attendees to the call overwhelmingly see the trade war as being a long-term prospect, with 63.8% expecting tariffs and retaliatory actions to last beyond 2020 while less than 10% see an end to hostilities this year. The main three questions asked focused on: the trade war's impact on the holiday season, nontariff tactics being used by the Chinese government and the Trump administration's long-term intent.
The forthcoming expansion of tariffs to all products from Sept. 1 will likely lead to price hikes for consumers ahead of the holiday season, while a 32.5% surge in imports of laptop computers year over year to the U.S. from China in June suggests stockpiling is also underway.
Nontariff tactics from the Chinese government may include the recent relaxation of currency management, the use of an "unreliable entities" list and the direction of state-owned enterprises' purchasing, shown by a 496% year-over-year surge in soybean imports in June while energy imports fell 59.1%.
Attempts by the Trump administration to bring manufacturing back to the U.S. may be struggling — seaborne imports from China fell 5.5% year over year in the three months to July 31, while those from the rest of the world rose by a similar percentage.
China wins the losing fight in July
China's exports expanded 3.3% year over year in July, reversing a decline the month earlier and beating economists' expectations. The improvement was even starker in yuan terms with a 10.3% growth likely helped by the currency's devaluation from May.
Export growth is being largely supported by semiconductors where there was a 31.7% jump after a 17.1% rise in the second quarter. The sector accounted for nearly one-third of the dollar value of export growth. Yet, downstream electronics exports contracted with telecoms products dropping 9.4% and computers down 6.1%.
One year on from the start of the trade war, there was a 6.5% decline in exports to the U.S. while imports from the U.S. slumped 19.1%. In that regard, at least, China "won" the latest round of the trade war. However, in dollar terms, the drop in imports and exports were roughly level. A 9.5% drop in total trade between the U.S. and China shows neither side is genuinely winning the trade war.
Samsung's big phone pricing may need to dial in tariff contribution
Samsung Electronics Co. Ltd. has started its latest round of telecoms product upgrades with the Galaxy Note 10 large format phone. The introduction comes amid signs of a continued slowdown in the smartphone industry. Exports of phones and network equipment from China and South Korea fell 9.4% and 34.9%, respectively, year over year in July.
That decline is partly due to a shifting of production to Vietnam — U.S. imports from Vietnam surged 74.6% year over year in June, while those from China and South Korea fell 2.3% and 59.4%. The challenge for Samsung in the U.S. — alongside other manufacturers with fall release cycles such as Apple — will come from new tariffs on Chinese exports, including phones, from Sept. 1 at a 10% rate.
Stockpiling and price increases are the two likely reactions. The latter should be taken in the context of already-rising average import values for phones. The average import value per handset increased 5.4% year over year in the 12 months to June 30 to reach $265.
US has little to lose from reduced China oil sales
Chinese oil buyers including PetroChina Company Ltd. and China Petroleum & Chemical Corp. may cut their crude oil purchases from the U.S. as part of a series of nontariff actions being taken by the government against forthcoming American tariff extensions.
That may prove to be a challenge for them given surging Chinese crude oil demand, with imports that rose 13.9% year over year in July after a 9.5% rise in the second quarter. The impact on U.S. oil exporters may be minimal. Shipments to China from the U.S. already fell 49.2% year over year in the second quarter and represented just 6.8% of the total in that period.
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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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