EsGlobal supply chain disruptions remained front of mind for our readers in June. The interruption of operations at the south China port of Yantian reduced container shipping capacity with effects that will be felt by retailers in the run up to the Q4’21 peak shipping season.
The elevated level of demand for shipping services has helped boost the revenues of the freight forwarders and container lines alike with K+N only expecting a normalization later in the second half of the year. The uncertain availability of services is leading to new corporate strategies including Home Depot’s chartering of its own shipping vessel.
Amazon’s expansion as a logistics firm may come into question as a result of new antitrust legislation proposals. Freight congestion isn’t the only disruption for supply chains though with labor shortages also dragging on firms’ ability to supply their customers.
Trade policy issues are never far away. The Biden administration completed its review of critical supply chains in critical minerals, batteries, semiconductors and pharmaceuticals with policy implications that could last for years. U.S. relations with China have yet to be resolved with the prospect of a reduced soybean harvest raising the likelihood of an even wider gap in Chinese purchases versus commitments.
Finally, medical supply chains remain in flux as the pandemic continues to rage, with India relaxing export rules for treatments but not vaccines.
#1 UPS, DSV Panalpina show forwarders’ bounty from logistics challenges (June 15)
A lengthy boom in demand for logistics services and elevated shipping rates have led to an increased degree of confidence among the freight forwarding firms. DSV Panalpina has upgraded its 2021 EBIT forecast by 4.3% while UPS has set a revenue growth target equivalent to as much as a 14.0% expansion through 2023.
The expansion in demand can be seen in U.S. seaborne imports which rose by 47.1% year over year in May and climbed by 18.3% versus May 2019. Shipments linked to DSV Panalpina and UPS performed close to average year over year, though UPS also expanded by 45.7% in May 2021 versus May 2019 suggesting a longer-term investment in growth.
Among the other major forwarders, C.H. Robinson was one of the fastest growing with 76.6% year over year expansion and growth of 68.0% compared to May 2019. Challenges abound, however, with port disruptions in China adding to congestion in the west coast U.S., putting service levels at risk.
Source: Panjiva
#2 Home Depot sets sail with sales tailwind, congestion headwind for retailers (June 16)
U.S. retail sales growth has continued at a rapid pace in May with sales excluding autos and fuel up by 23.3% year over year and by 15.7% compared to May 2019. Sports / leisure goods led the way while apparel’s growth accelerated to 14.4% from 9.8% in April on a 2019 basis.
The elevated demand has resulted in a surge in imports of consumer discretionary goods with home furnishing and appliances expanding by 62.2% and 52.2% compared to 2019 respectively. Shortages may emerge in apparel given imports only rose by 4.4%.
Logistics remain challenging with port congestion and elevated rates on both sides of the Pacific. That has led Home Depot to charter its own vessel. Total U.S. seaborne imports of home improvement products climbed by 26.6% in May 2021 versus May 2019.
The ports at and near Yantian, China accounted for 7.9% of those shipments in the 12 months to May 31 with leading container lines being MSC and Evergreen Marine.
Source: Panjiva
#3 ADM, Cargill may face end of bean bounty on hoarding, harvest prospects (June 22)
Poor harvest conditions and pandemic-related disruptions for labor are set to have a significant impact on soybean supply chains and geopolitics in the coming months. USDA data indicates that just 60% of the emerging U.S. soybean crop is of good-to-excellent quality.
That may cast doubt on deliveries under the phase 1 trade deal with China. Committed purchases by China for the farm year starting September have already reached 3.05 million tons, similar to last year’s figure at the same time and 2.8x 2017’s level.
At the same time Brazilian farmers are starting to hoard supplies after an earlier surge in exports which saw exports climb 11.1% in the three months to April 30, the first half of the peak shipping season.
That overlaps with the second half of the U.S. export season which saw growth of 9.1% over the same period. The expansion in Brazilian exports has been led by Archer Daniels Midland and Cargill with 24.1% and 20.9% growth respectively.
Source: Panjiva
#4 Amazon’s forwarding reach may be clipped by antitrust, Yantian challenges (June 22)
Amazon faces a new round of antitrust legislation that may eventually require it to sell its logistics operations, potentially including its international freight forwarding business that provides fulfilment services for Chinese exporters to the U.S. That comes as ZIM Shipping has renewed its partnership with Alibaba and as digital-first forwarders continue to build market share.
U.S. seaborne imports handled by Amazon reached nearly 13,000 TEUs in May after a three-fold increase. Like other freight forwarders, Amazon faces significant congestion issues at major seaports in China and the U.S.
Amazon may be affected more than most heading into the peak shipping season with shipments from Yantian having accounted for 32.4% of imports to the U.S. handled by Amazon in the 12 months to May 31.
Source: Panjiva
#5 Biden’s materials security aims depend on allies, emerging market spending (June 15)
The Biden administration’s review of critical supply chains includes a series of recommendations to improve the security of supply of strategic minerals. While the report identifies 189 U.S. locations for producing such minerals, the Department of Defense-led review also flags a need to look overseas including shipments from allies in the Quad and G7.
Those countries only accounted for 28.7% of U.S. imports of a range of critical minerals in the 12 months to April 30 while China and Russia represented 17.7%. In the case of rare earths China represented 48.7% of supplies after a 40.4% slide in the three months to April 30.
The DoD also recommends the government makes selective investments “in emerging markets with its debt, equity and political risk insurance products”.
One example may be in unwrought tin where Indonesia accounted for 26.5% of U.S. imports in the 12 months to April 30. Yet, the U.S. only accounted for 9.1% of Indonesian tin exports in the 12 months to March 31 after a decline of 38.5% year over year in Q1’21.
Source: Panjiva
#6 Remdesivir released, vaccines reserved under Indian export update (June 15)
The Indian government has partly relaxed its restrictions on exports of Remdesivir, an antiviral used in the treatment of COVID-19. Total exports of the drug and its active ingredient were worth $111 million in the 12 months to April 30 and dropped to just $2.7 million in the month of April before the ban, now modified to licensing, was introduced.
India’s wider restriction on exports of COVID-19 vaccines remains in place after being imposed in April. Total Indian exports of all vaccines dropped by 36.8% in April versus the Q1’21 average. That was led by a 55.9% slump in shipments linked to Bharat Biotech and included a 13.5% slide in exports associated with Serum Institute.
Source: Panjiva
#7 Biden’s 90 ideas provide long-term aims not short-term fixes (June 10)
The Biden administration’s 100 day review of supply chains for the four critical sectors of semiconductors, large capacity batteries, minerals and pharmaceutical ingredients has yielded a 250 page review including around 90 detailed recommendations.
While far from being a European-style, state industrial policy the package of recommendations will likely result in wide ranging changes to legislation and government strategies as well as a mixture of new spending. Importantly the review will spur a whole-of-government approach to policy making. It will also include sourcing from ally nations in the Quad and G7, particularly in key minerals.
The measures are unlikely to provide a quick fix for supplies of any of the major product areas which will be particularly relevant for semiconductors. The short-term volatility in the four supply chains can be seen in recent trade data. U.S. imports of semiconductors jumped by 38.3% in April versus April 2019 having fallen by 0.4% in February versus February 2019.
Imports of large capacity batteries surged by 82.5% in April 2021 versus April 2019 as new vehicle models have been introduced. Imports of pharmaceutical ingredients declined by 1.7% year over year, raising some doubts over vaccine manufacturing. Imports of critical minerals meanwhile dropped by 20.5% in April versus 2019.
Source: Panjiva
#8 K+N expects second-half normalization, Vietnamese shipment worth watching (June 21)
The majority shareholder of K+N, Klaus-Michael Kuehne, has stated that volumes handled by the freight forwarder in Q2’21 are “still at a high level” but that there will be “a normalization in the second half of the year”.
The scale of the surge in activity experienced by K+N can be seen in the 39.9% year over year increase in U.S. seaborne imports handled by the firm in Q1’21, which rose to 39.6% in April and 49.4% in May. A return to normal could make for a significant drop given imports in the three months to May 31 were 26.1% higher than the last ‘normal’ peak season in the three months to November 30, 2019.
The boom in shipments has been led by imports from Vietnam which increased by 163.5% year over year in the three months to May 31 and by 268.2% compared to the same period of 2019. They included shipments for apparel suppliers like Deckers Outdoor and electronics producers including TP Link.
Source: Panjiva
#9 Netgear, Samsung face pandemic disruptions from Vietnam’s staff shortages (June 2)
A renewed series of spikes in COVID-19 infections is causing further disruptions to global supply chains in southeast Asia. In one example, Vietnam’s northern provinces of Bac Ninh and Bac Giang are suffering marked shortages of staff due to illness.
That’s particularly relevant for the renewable energy and technology sectors. Panjiva’s data shows 43.1% of U.S. seaborne imports from the two Vietnamese provinces in the 12 months to April 30 were renewable energy products while a further 11.3% are classified as telecoms and networking gear.
Major importers of renewable energy equipment to the U.S. from the provinces include Ningbo Boway and Trina Solar. Total shipments of solar panels from the region fell 32.5% year over year in the three months to April 30, likely as a result of regulatory uncertainties.
Shipments of telecoms and network gear by contrast surged 44.5% year over year in April on elevated work-from-home demand. That included a 203.4% jump in imports linked to Samsung Electronics and a 142.5% rise in imports associated with Netgear.
Source: Panjiva
#10 Ikea, Qurate face shipping challenges as south China ports fight congestion (June 14)
Container shipping rates for routes from China have climbed 28.1% in the eight weeks to June 11. That’s been due in part to ongoing congestion at the southern Chinese ports centered on Yantian. Maersk has indicated that the ports at Nansha, Shekou and Yantian are running at just 45% of capacity.
Ocean Network Express and CMA CGM have both applied surcharges for shipments into Yantian of $1,000 per container and $1,250 per refrigerated container respectively. There’ll be a knock-on effect to U.S. imports within a few weeks.
The three ports accounted for 11.7% of U.S. seaborne imports in 2020 with shipping having expanded by 67.5% year over year in April and May combined and by 50.7% compared to the same period of 2019.
The growth has included firms as wide ranging as Conair and Mattel, though recent growth has been dominated by retailers with shipments linked to Qurate and Ikea up by 117.5% and 152.1% year over year respectively in the past two months.
Source: Panjiva
