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.
Editor's note: This is the last edition of the Supply Chain Daily for 2019. The feature will resume publication Jan. 3, 2020, with a series of outlook reports covering what to expect in global trade policy, logistics and industrial supply chains in the new year. We want to thank all our readers for your support in 2019 and wish you a peaceful holiday season.
Qurate, Givaudan find no festive tariff cheer as leniency petitions are rejected
The U.S. government has rejected 3,280 appeals for reduced section 301, list 3 tariffs on Chinese exports from 241 companies. That brought the average acceptance for reduced duties to just 3.6% with a further 21,640 requests still outstanding.
The rejections are likely linked to the products being mostly consumer-related where assembly could theoretically be moved to the U.S.
Qurate Retail Inc. had 170 filings rejected across furniture and electrical products. China represented 73.6% of U.S. seaborne imports linked to the firm in the three months to Nov. 30. Tariffs have not been a block to increasing shipments from China, though, with a 95.0% year-over-year surge registered in the three-month period.
Fragrance maker Givaudan SA had 12 requests for lower tariffs on basic chemical imports rejected. While China represented just 8.3% of chemicals imports linked to the firm, the nature of the chemical supply chain may make finding alternative suppliers in France and Mexico more complex.
Queen fires the start gun for 229 day Brexit sprint
The reopening of the British Parliament by Queen Elizabeth II includes a vote on the Brexit Withdrawal Agreement Bill. The U.K. will leave the EU on Jan. 31, 2020, and enter a transition period through the end of the year.
Formal negotiations with the EU to formulate a post-Brexit trade deal may only have 229 days to be completed — from March 1 to Oct. 16, 2020 — given the requirements of legal and parliamentary scheduling on the EU side. The trade arrangements to be applied from 2021 onward could have a significant impact on complex, cross-border supply chains, though many firms are already preparing.
Airbus SE has recommitted to its British wing factory, though with the EU representing 59.3% of British aerospace exports but the U.K. only representing 6.6% of the EU's exports, there is clearly an asymmetric risk in trade negotiations.
More generally, though, British firms have cut their exposure to intermediate product imports from the EU to 46.7% of U.K. total intermediate imports from 50.6% in 2016, when the Brexit referendum was held.
SQM prioritizes China while Chile wants to diversify exports
Chilean Trade Vice Minister Rodrigo Benitez has stated that the recently launched U.S.-China trade deal will help reverse declining exports as "the better the news from that situation, the better for our economy." The government nonetheless "wants to diversify exports." Exporters have the flexibility to do so given Chile's wide range of free trade deals.
Copper exports have been at risk from the U.S.-China trade war, though there was actually little impact with exports of copper to China having surged 16.8% year over year in the three months to Oct. 31. BHP Group's exports of copper cathode rose, while Codelco's fell.
While Chile's exporters are in theory free to change their supply patterns, ownership by Chinese companies may be crimping that ability. For example, Sociedad Quimica y Minera de Chile SA, or SQM, which is part-owned by Tianqi Lithium Corp., has increased its exports to China by 745% year over year in the three months to Oct. 31. China now represents 42.3% of SQM's exports and has grown at the expense of supplies to the U.S. which slumped 66.8% lower over the same period.
Patagonia climbs as Oakland sees the beginning of the end
Port of Oakland Executive Director Danny Wan has stated that the "phase one" U.S.-China trade deal is "the beginning to the end of damaging trade restrictions" though it will take some time "to get global trade flowing freely again."
Imports to Oakland from China fell by 8.6% year over year in November while those from Taiwan and Vietnam surged 32.2% and 62.9% higher, respectively, in November.
One of the fastest-growing importers to Oakland from Vietnam may have been clothing maker Patagonia, with shipments linked to the firm having surged by 115% year over year in the three months to Nov. 30. Furniture shipments linked to Berkshire Hathaway Inc.'s RC Willey rose by a more modest 18.2% while Crate & Barrel Holdings Inc.'s fell by 2.8%.
Cote d'Ivoire beats Ghana in satisfying America's cocoa demand
The governments of Ghana and Cote d'Ivoire are looking to boost economic development by moving up the value chain of chocolate production from exporting basic supplies to shipping processed, intermediate cocoa products. U.S. imports of intermediate cocoa products rose by 12.2% year over year in the 12 months to Oct. 31.
Exporters from Cote d'Ivoire, including Société Africaine de Cacao SA, have seen success with a 90.8% surge in exports of intermediate products to the U.S. in the three months to Oct. 31. Shipments of primary products, including those by Cocoa Marketing, have also improved. By contrast, exports from Ghana have struggled with shipments of primary cocoa down 91.6% and intermediates by 41.4% over the same period.
Dow, Chevron may be helped by China's chemical gesture
The Chinese government has exempted six products exported by the U.S. — including white mineral oil, paraffin wax and four ethylene cycle chemicals — from import duties as a goodwill gesture during phase one trade deal talks.
Total U.S. exports of the six products were worth $6.22 billion in the 12 months to Oct. 31. Given China represented just 4.4% of the total after a 50.6% decline, a reallocation of exports could fill a sizeable part of China's $200 billion purchasing commitment under the phase one trade deal.
Leading exporters of polyethylene — the largest of the six U.S. exports by value — that could be helped by the deal include Dow Chemical Co. and Chevron Corp.
Hyundai, Posco recast steel shipments, US rules on Vietnamese circumvention
The U.S. Department of Commerce has issued final circumvention rulings on corrosion resistant steel, or CORE, and cold rolled steel, or CRS, reexported from Vietnam that was sourced in South Korea and Taiwan to avoid duties.
U.S. imports of CORE and CRS have declined by 17.5% and 20.6% year over year in the 12 months to Oct. 31, with a drop in demand exacerbated by falling prices. CORE steel imports from South Korea and Taiwan fell 29.3% and 27.8% year over year, respectively, in the 12 months after the duties were issued in 2015. They have since recovered with South Korean exports increasing 41.8% in the 12 months to Oct. 31 compared to a year earlier.
Imports from Vietnam jumped 444.9% after duties were issued, illustrating the potential circumvention. The Vietnamese government has been cracking down on reexports more broadly to avoid the risk of wider tariff action by the U.S.
Exporters from South Korea to the U.S. include Hyundai Steel Co., where shipments associated with the firm rose by 5.1% year over year in the 12 months to Oct. 31, as well as POSCO, where shipments increased by 33.0%.
European growth can't prevent another global drop in trade activity
The EU represented a rare bright spot in global trade in October. Exports in euro terms climbed 5.6% year over year, accelerating from an improvement from 2.7% in the third quarter due to higher shipments from Italy and the Netherlands. In dollar terms, there was a less impressive 1.6% expansion, but that still beat falling exports from the U.S. and China as the two waged their trade war.
The EU's improvements could not prevent a drop of 3.0% in global exports from 37 countries plus the EU year over year in October, according to Panjiva's analysis. That followed consecutive declines in the first three quarters of 2019. The outlook is not much brighter with November exports from 14 countries down by an average 3.2%, while the EU may face the prospect of trade conflict with the U.S. in 2020.
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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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