The Ambassador Bridge has been reopened after protests against COVID-19 restrictions and vaccine mandates closed it for almost a week, the Associated Press reported. This displaced potentially $1.3 billion in imports, based on the weekly average value of imports in 2021. The bridge is the busiest land crossing between the U.S. and Canada; last year, it handled 18.9% of U.S. imports from the neighboring country.
The nearly weeklong closure could affect businesses relying on the trade route. Among the most imported products over the bridge are those for the automotive sector, one of the main industries in the Detroit area, accounting for 35.0% of fourth-quarter 2021 imports. Machinery followed, representing 13.0% of imports, while pharmaceuticals, electrics and plastics accounted for 3.5%, 3.9% and 4.3% of traffic by value, respectively, in the same period.
Panjiva's analysis of official data shows that imports associated with the autos sector fell 12.1% year over year in the fourth quarter of 2021 and 14.5% compared with the fourth quarter of 2019. This creates additional pressure for an already logistically sensitive industry that has been grappling with chip shortages in the past year. Meanwhile, imports of pharmaceuticals declined 2.9% year over year in the fourth quarter of 2021 but came in 20.3% higher than the equivalent quarter in 2019, likely denoting increased medical imports due to the COVID-19 pandemic.
Products that showed increased activity over the bridge in the final quarter of 2021 include plastics, up 19.7% year over year, and machinery, up 13.6% year over year. Both categories are goods that have been in high demand following consumer preferences shifting away from services.
U.S seaborne data offers little insight into land imports through the Detroit bridge, but it can provide clues on which companies may be affected by looking at changes in import activity. A decline in seaborne imports may indicate increased reliance on land-based routes amid mounting congestion-related disruptions. Ford Motor Co. and General Motors Co. may be in this category as seaborne imports in January fell 29.5% and 9.4% year over year, respectively. Seaborne imports associated with Plastic Development Group were also down 49.9% year over year, while those linked to Mitsubishi Electric Corp. increased 82.2% and could indicate decreased reliance on trucking.
Companies that went through supply chain difficulties last year are inclined to increase inventories to safeguard their manufacturing or retail operations. Risks from incidents like the Ambassador Bridge closure only reinforce that decision, even with the extra cost of carrying more goods on the balance sheet. Panjiva's analysis of S&P Capital IQ data on goods-producing sectors confirms that industries as a whole are following that pattern.
The largest increase in inventories was in retail, growing 21.8% year over year in the first three quarters of 2021 and 35.9% against 2019. Retailers are often interested in tight inventory management and pricing the opportunity cost of carrying extra goods, but in this case, the pendulum shifted toward overstocking warehouses and stores to meet demand.
Pharmaceuticals inventories rose 9.7% year over year in the same nine-month period of 2021 and 30.7% versus 2019. Comparing the data between 2020 and 2019 within the nine-month period shows growth of 19.2%, possibly reflecting the move by companies to bolster drug stocks at the height of the pandemic. Conversely, the impact of COVID-19 likely contributed to the 3.7% year-over-year fall in automotive inventories in 2020.
Eric Oak is a researcher 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. Links are current at the time of publication. S&P Global Market Intelligence is not responsible if those links are unavailable later.
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