EnK+N has reportedly cancelled its container-line insurance, confident in the recovery of the sector – we look at whose services it uses. Malaysia joins (nearly) everyone else in appealing the U.S. solar power tariff decision. Mexican rail blockades may hinder the automotive sector. Also: antitrust fines for car carriers; duties on biodiesel exports from Argentina and Indonesia; Mobile World Congress preview; Apple looks for cobalt; and President Trump’s economic theories.
Daily Datum: 84%
drop in U.S. biodiesel imports in 4Q 2017 vs. a year earlier
NEED TO KNOW
K+N Takes Confident Stance on Container-Lines, Cuts Exposure to Hapag-Lloyd
Freight forwarder K+N has reportedly cancelled its container-line insurance in response to the recovery of the sector’s fundamentals. K+N’s use of container-lines has changed significantly in the past year. Hapag-Lloyd remains the number one liner (unsurprisingly given Kuehne Holding’s stake in both firms) with an 18% share of U.S. inbound maritime traffic. MSC, number two, has seen a 39% rise in business in 2017 vs. 2016.
A Herfindahl-Hirschman-style analysis shows the concentration of suppliers is unchanged in the past two years. However the current round of consolidation (including Maersk-Hamburg Sud, ONE and COSCO-Orient Overseas) will increase the concentration by 28%. On individual lanes it can be significantly higher. The structure of container-line services will also overshadow any deals K+N itself may make, which will likely be focused next on Asia.
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Source: Panjiva
Hanwha Q-Cells Made Hay While The Sun Shined, Dawn Up To WTO
The Malaysian government has joined China and South Korea among others in requesting WTO consultations regarding U.S. section 232 tariffs on solar power equipment imports. That’s not a big surprise as Malaysian exports were worth $1.6 billion in 2017, or 31% of the total. It leaves Vietnam as the only major supplier nation to not yet join the case.
Exports from Malaysia to the U.S. surged higher 66% in the three months to November 30 vs. the first quarter, but have since dropped by 47%. The largest supplier (with 53% of Malaysian exports to the U.S.) was Hanwha Q-Cells, though its shipments dropped to zero in January. Jinko Solar and Flextronics have continued shipments – the former from a factory is set up in response to earlier tariffs against Chinese supplies.
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Source: Panjiva
Rail Blockades Hurt Mexican Auto Supply Chains, Could Be Worse Under NAFTA 2.0
AMIA, the Mexican automotive industry association, has called on the government to stop rail blockades caused by labor unrest. So far they have cost industry $19 million due to supply chain disruptions. Exports of completed vehicles surged 9% in January vs. a year earlier suggesting the impact on outbound shipments has yet to bite.
Imports of parts by rail from the U.S., however, have slipped 6% on a year earlier in the fourth quarter. They represented 30% of imports of parts from the U.S., which in turn represented 72% of total incoming parts. The parts-by-rail segment of Mexican manufacturers’ supply chains will become more important if a renegotiated NAFTA results in stricter North American rules of origin.
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Source: Panjiva
GLOBAL TRADE WRAP
On the topic of autos, the European Commission has applied the long-awaited antitrust fines of of 395 million euros ($484 million) on five car carriers. The case covered the six years to September 2012, since when there has been some shift in market power. On U.S.-inbound routes Wallenius Wilhelmsen saw its market share drop to 13% in 2017 from 17% in 2012, largely due to the rise of Hoegh which was not a part of the case. The three Japanese shippers’ share was largely unchanged at 22%. (Panjiva Research – Logistics)
The U.S. Commerce Department issued final duty determinations on biodiesel exports from Argentina and Indonesia. The case has been largely successful, with zero imports from the two countries since September and an 84% slide in total imports in the fourth quarter vs. a year earlier. The ruling includes the statement “even our closest friends must play by the rules”. That suggests exemptions to the solar tariffs discussed above, and the forthcoming section 232 decisions for steel and aluminum, may be hard to come by. (Panjiva Research – Industries)
The forthcoming Mobile World Congress will likely feature the launch of Samsung’s S9 range of phones as well as more information on 5G network roll-outs. The former comes as U.S. imports of phones from South Korea and Vietnam – Samsung’s two main production bases for U.S. handsets – climbed 25% in December vs. a year earlier. Spending on telecoms network infrastructure may be slowing ahead of 5G, with U.S. imports of equipment having risen by just 3% in the fourth quarter. Globally the picture is still rosy for manufacturers including Quanta, after Chinese exports climbed 13% in the fourth quarter. (Panjiva Research – Industries)
Staying with telecoms, Apple may be seeking to secure direct supplies of cobalt. That comes as competition for the battery component hots up, with Toyota and Tesla seeking long-term supply contracts for lithium. The challenge for Apple will be to find cobalt with the right provenance. Chinese imports of cobalt surged 236% on a year earlier in 4Q and set a new record in December, while 87% of those supplies came from the Democratic Republic of Congo. (Panjiva Research – Industries)
In case you missed it: S&P Global, a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide, has announced that it is set to acquire Panjiva, a privately-held company that provides deep, differentiated, sector-relevant insights on global supply chains, leveraging data science and technology to make sense of large, unstructured datasets. (S&P Global, Panjiva Inc.)
The Economic Report of the President has been published, and provides an in-depth guide to the theory underpinning the Trump administration’s trade policy. The report reiterates the “fair and reciprocal” concept that has driven over two-dozen trade policy actions in the past year – as outlined in our 1/18 report. Its aims including improving exports of energy and agriculture, and the need to help those left “worse off” by trade policy actions. That may set the tone for administration’s trade actions running into the midterm elections. (White House)
