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.

UPS, CMA CGM see beginning of the end to COVID-19 disruptions

The logistics industry may be seeing the first signs of an end to COVID-19 coronavirus-related disruptions in China. Airfreight industry association IATA warned that the outbreak "has severely disrupted global supply chains" with data showing global airfreight volumes falling by 3.3% in January even before the outbreak.

Yet, United Parcel Service Inc. CFO Brain Newman has said the firm is "starting to see a rebound in activity in China and Hong Kong" and will try to take advantage "of some pent-up demand." China represented 61.5% of UPS's U.S.-inbound, seaborne traffic and had seen a 20.0% year-over-year slide in volumes in January and February combined.

Container-line CMA CGM SA meanwhile has stated that in mainland China "business operations have now entered the recovery phase." There was a 10.4% year-over-year slide in CMA CGM's China-to-U.S. seafreight volumes in January and February, while China represented 48.7% of CMA CGM's U.S.-inbound traffic in 2019.

(Panjiva Research - Logistics)

Cheap fuel salves COVID's costs to container rates

Container shipping rates have weakened over the past month, with the benchmark North Asia to West Coast North America rate falling to $1,350 per FEU from $1,500 per FEU between Jan. 24 and Feb. 24, according to S&P Global Platts data. Perhaps unsurprisingly, market participants are blaming volume shortages due to the outbreak of COVID-19, with one freight forwarder commenting "there isn't any cargo around — nobody has come back to work."

It's worth bearing in mind that though the Shanghai Shipping Exchange index has only so far performed in line with the median of the past seven years with a 9.2% decline since the start of the year.

Some of the pressure on container-lines will be relieved by a similar drop in bunker fuel prices with an 18.5% slide in the North Asia-West Coast North America costs. As a consequence, bunker-excluded rates are broadly unchanged. That combined, the seasonal pricing would suggest a degree of discipline among the container-lines.

This research is based on a report written by George Griffiths of S&P Global Platts, augmented with commentary from Panjiva research.

(Panjiva Research - Logistics)

Supply chain questions for Nipro, J&J as COVID-19 export restrictions widen

The government of Turkey has restricted exports of medical supplies including masks and surgical gowns. Such restrictions are becoming increasingly common in the wake of the COVID-19 coronavirus outbreak. Turkish exports of medical supplies more broadly reached $275 million in the 12 months to Nov. 30, 2019 — led by shipments to Europe and China — after a 4.0% expansion in 2019.

Turkey only represented a small part of total U.S. imports which climbed 12.6% in 2019 to reach $10.9 billion. Mexico accounted for 27.8% of U.S. imports after a 28.7% surge in shipments in 2019 while the EU accounted for 26.0%. Leading importers to the U.S. from Mexico include Becton Dickinson and Co. and Kimberly-Clark Corp. while importers from outside North America include Nipro Corp. and Johnson & Johnson.

(Panjiva Research - Healthcare)

ArcelorMittal, Ternium may feel COVID-19 disruption in Mexican exports

Mexican steel production slipped 15.9% year over year in January. That was in part due to a slowdown in shipments planned for China due to the COVID-19 coronavirus outbreak according to Grupo Simec.

Mexican exports to China may have surged 29.1% year over year in the fourth quarter of 2019, but had otherwise been in decline with an 8.4% slide. The drop was in part due to lower shipments to the U.S. despite the removal of section 232 tariffs.

Major steel exporters all suffered lower exports in the fourth quarter of 2019. ArcelorMittal performed worst with a 21.7% slide while Ternium SA and Tenaris SA saw declines of 8.1% and 1.2%, respectively.

(Panjiva Research - Metals & Mining)

Lego's built a US supply chain immunity to COVID-19 disruptions

Toymaker Lego System A/S reported a 5.8% expansion in revenues in 2019, including a 3.4% rise in sales in the Americas. The firm expects single-digit growth in 2020 and to be ahead of the industry average. Yet, Lego may have had a tough end to 2019 in the U.S. with imports linked to the firm falling by 11.2% year over year in the last three months of the year.

Lego's reliance in the U.S. on China is minimal at just 1.0% of shipments. That cuts its supply chain exposure to the COVID-19 outbreak compared to peers Hasbro Inc. and Mattel Inc. Instead, supplies from Mexico represented 65.0% of the total in 2019 while Europe accounted for 33.2%. Lego won't be entirely immune from COVID-19 though as 17.5% of 2019 sales were in Asia and it produces in China for sales into China.

(Panjiva Research - Consumer Discretionary)

Christopher Rogers is a senior 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.

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