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.
Biden's next 1,361 days: Onshoring, vaccines and taxes but no big trade deals
U.S. President Joe Biden's first 100 days in office have set the stage for the remainder of his term in office, with policy support for supply chain adaptations such as onshoring and decarbonization rather than wide-ranging trade deals. That comes as trade activity has boomed, with U.S. exports and imports surging 17.0% in March versus a year earlier, helped by a 37.5% jump in consumer products imports helped by the stimulus package.
The launch of a 100-day review of critical supply chains, due to report in early June, will set the scene for onshoring of pharmaceutical supply chains, semiconductors and large-scale batteries as well as ensuring access to strategic minerals. An illustration of the need to improve access to these products has come in the form of the automotive sector's semiconductor travails, with exports in March down 8.4% compared to March 2019.
The proposed infrastructure package will make $100 billion of funding available to encourage onshoring, including for semiconductors, and brings the U.S. into competition with China's 14th five-year plan and the EU's new industrial policies.
The onshoring of medical supply chains has been a focus during the pandemic. While initially protectionist, the administration has started to free up pharmaceutical ingredients and vaccine exports. New arrangements to support vaccine supplies to developing economies are imminent, though it is worth noting that Mexico's imports of vaccines — which may be helped by a loan program — only rose 2.6% year over year in January and February combined.
Trade policy itself has been relatively static, with the U.S. Trade Representative and Commerce Department very much in review mode. Most tariff plans have been left in place, including those on imports from China and the related phase 1 trade deal. The latter has yet to be reviewed under the formal six-monthly process and lapses at the end of 2021. So far, exports under the deal reached $9.17 billion in March, compared to a 2020 target of $11.9 billion and a 2021 target of $14.8 billion.
The signing of significant new trade deals looks unlikely, particularly with the Trade Promotion Authority set to lapse in July. Lower-key deals, such as that with the U.K. on aerospace subsidies, may be possible. That would also help hard-pressed U.K. exporters whose shipments of products covered by retaliatory tariffs to the U.S. fell 14.0% year over year in February.
Multilateral engagement is very much on the agenda, though. New commitments on climate change have been made, bringing opportunities for renewable energy and autos supply chains as well as risks for the logistics and metals sectors. New taxes on carbon, including border adjustable measures, as well as a resolution on digital services taxes may all yet be implemented by the Biden administration during the rest of its term in office.
CMA CGM may draw FMC's ire with surcharge approach to export congestion
CMA CGM SA has applied an "emergency revenue charge" for U.S. exports to Latin America. At $320 per forty-foot equivalent unit, or FEU, that compares to global average container shipping rates of $4,500 per FEU and may be driven by knock-on congestion from North American ports. Given the soaring profitability of the container line sector, the move may draw negative attention from the Federal Maritime Commission.
CMA CGM was the fourth-largest container line on U.S.-to-Latin American ports with an 8.5% share in the 12 months to March 31. A.P. Møller - Mærsk A/S and MSC Mediterranean Shipping Co. SA are leading with shares of 30.0% and 28.2%, respectively. Exporters to Mexico can use other modes such as rail or trucks.
Firms shipping to Brazil, including CMA CGM customers including Dow Inc. and Shin-Etsu Chemical Co. Ltd., have few options. CMA CGM's shipments to Brazil from the U.S. surged 83.7% year over year in the first quarter and accounted for 23.2% of shipments.
(Panjiva Research – Logistics)
India's oxygen emergency requires steel export reductions
The Indian government has requested that steelmakers focus their liquid oxygen production, used in the blast furnace process, on supplies to the medical industry. While India's COVID-19 crisis clearly needs to take priority, there will be downstream supply chain implications for producers and buyers of Indian steel.
Exports of basic steel products from India had already fallen by 14.3% year over year in the three months to Jan. 31. Shipments linked to Steel Authority of India Ltd., which has already agreed to the government's call, fell 32.2%. Exports linked to Tata Steel Ltd. and JSW Steel Ltd. fell 33.6% and 18.2%, respectively.
(Panjiva Research - Metals & Mining)
Mitsubishi, Honda plan for chip supply chain challenges in May
The automotive industry may be beset by a shortage of semiconductors at least until May, with Mitsubishi Motors Corp. and Honda Motor Co., Ltd. being the latest automakers to pause production due to the supply chain disruptions.
Mitsubishi will cut global production by 16,000 vehicles in May, equivalent to 16.4% of output in the first quarter and following an 8.4% year-over-year dip in output by the firm in March. The big seven Japanese automakers' production and exports surged 31.7% and 3.4%, respectively, year over year in March. Both were well down on 2019 levels.
The production cuts will drive shortages on forecourts globally. U.S. seaborne imports from Japan were already down 7.1% year over year in March, including a 58.3% drop in shipments linked to Subaru Corp. and a 9.3% slip in shipments linked to Toyota Motor Corp.
EU Parliament approves U.K. trade deal, but Brexit uncertainties remain
The European Parliament has ratified the EU-U.K. Trade and Cooperation Agreement, avoiding a costly collapse of current trading relations from April 30. The Parliament has nonetheless warned the U.K. to "fully implement the terms of the agreements which it has signed" with respect, in particular, to trade with Ireland.
Further negotiations over non-goods trade and potential dispute settlement measures relating to trade with Ireland are potential "post-Brexit" risks for regional supply chains. The cost to trade from the new customs arrangements can be seen in U.K. exports to Ireland, which declined by 11.4% year over year in February, or 16.7% if excluding a surge in medical product shipments.
The downturn has been widespread, including a 30.8% drop in capital machinery shipments and a 28.3% slide in car exports, while shipments of meat and cereals fell 50.1% and 34.2%, respectively.
Christopher Rogers and Eric Oak are researchers at Panjiva, 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.
The Supply Chain Daily has an editorial deadline of 7:00 a.m. ET. Some external links may require a subscription. Links are current at the time of publication. S&P Global Market Intelligence is not responsible if those links are unavailable later.