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Panjiva Daily: TikTok, COVID-19 and the unhappy toy season; finding UPS’s Vietnamese targets

Global 1168 Panjiva Daily 554

Social media success has become key for the toy industry as supply chain data indicates there have been few winners this fall. UPS is bolstering its investments in Vietnam with a view to improving service offerings, but faces regulatory hurdles.

Also: Tesla reorients delivery pattern as U.S. loses out on lithium supplies; K+N takes a more conservative Q4 view than DSV-Panalpina, DP-DHL; European Union struggles to keep pace with global trade recovery; Brexit Watch: EU automakers seek a route to lower tariffs; U.S. elections not just a calendar event for U.K. trade deal; no surprises, but action needed from U.S. cybersecurity report; and just-in-time ports need just-in-case cybersecurity spending.

Daily Datum: 0.8%
dip in Q4’20 ocean freight shipments implied by K+N’s guidance

NEED TO KNOW

Unhappy holidays for toymakers as TikTok, COVID-19 change success criteria
The dynamics of toy sales are changing as a result of the pandemic with social media presence, including TikTok unboxing videos, outweighing word-of-mouth at schools and playdates in determining success. Examples include Zuru’s 5 Surprise Brands and IMC Toys’ VIP Pets.

U.S. seaborne imports linked to Zuru climbed 15.3% year over year in September to reach a record. Shipments associated with IMC Toys jumped 14-fold in September. Their success comes against the backdrop of a decline in total U.S. seaborne imports of toys with a 10.6% year over year drop in September. That extends a long-term decline as spending shifts to virtual goods.

Among the smaller brand owners, Jakks Pacific related shipments dropped by 25.4% as the firm renegotiates its finances. WowWee’s 17.4% slide may reflect a lack of success in its Baby Shark brand. Tomy and Spin Master did better with imports linked to the two up by 37.4% and 2.8% respectively.
(Panjiva Research – Consumer Discretionary)

Toy imports in decline even before the pandemic

Chart segments U.S. seaborne imports of toys by brand owner.   Source: Panjiva

UPS’s Vietnam expansion could target Longi Solar, Nintendo as new clients
UPS has taken full control of its Vietnamese operations with a view to providing a more integrated set of third party logistics services to its customers. The firm’s region head has stated that “notwithstanding an emerging second wave, Vietnam is in a prime position for a quick recovery“.

One challenge to that may come from the Trump administration’s new trade policy review of the country which may cause supply chain operators to review their use of Vietnamese factories. It’s unlikely to be completed before the elections though.

U.S. seaborne imports from Vietnam handled by UPS have grown in a series of waves in the past four years, including a 115.4% year over year increase in shipments in Q3’20. The routing still only represented 2.4% of total imports handled by UPS Q3’20.

Potential customers for UPS’s services are firms which ship from the regions near Ho Chi Minh City and Hai Phong where UPS has current and forthcoming handling sites. U.S. seaborne imports linked to Longi Solar from the region accounted for 6,890 TEUs handled in part by DB Schenker, followed by Sumitomo Electric’s 4,640 TEUs handled partly by Yusen Logistics. Other major importers to the U.S. from the region include Deckers Outdoor and Nintendo.
(Panjiva Research – Logistics)

Technology, apparel lead shipments to U.S. from Vietnam

Chart segments U.S. seaborne imports from Ho Chi Minh City and Hai Phong ports by consignee.   Source: Panjiva

Tesla reorients delivery pattern as U.S. loses out on lithium supplies
Tesla has announced a 43.6% increase in vehicle deliveries in Q3’20. The firm will be rearranging its supply chain to ship Model 3 vehicles to Europe from China, possibly instead of from the U.S., and will eventually open a new factory in Germany.

The in-market, for-market strategy cuts the time between production and deliveries. It may also reduce total U.S. exports of electric vehicles which already fell by 3.9% year over year in August after a 0.2% dip in July.

Most mainstream manufacturers are introducing electric vehicles in the next two years, including General Motors’ Cadillac and Hummer brands. That will lead to a need for increased U.S. imports of batteries and raw materials. So far the U.S. has lost out in shipments of lithium.

Only 3.9% of exports of lithium from Chile, linked to SQM and Albemarle, went to the U.S. in the past 12 months. Exports to China have increased by 29.9% year over year in the three months to Aug. 31 while those to the U.S. and EU dropped by 32.0% and 54.3% respectively.
(Panjiva Research – Autos)

China comes to dominate Chilean lithium exports

Chart segments Chilean exports of lithium by destination on a trailing three-month average basis.   Source: Panjiva

GLOBAL SUPPLY CHAIN WRAP

K+N takes a more conservative Q4 view than DSV-Panalpina, DP-DHL
K+N has reported Q3 revenues which fell by 3.9% year over year including a 12.8% drop in air freight due to “a slower than initially expected recovery of the aviation sector“.

Similarly, ocean freight handling fell by 5.1% despite the freight forwarder experiencing improved shipping on Asia to North America lanes in Q3 versus Q2. U.S. seaborne imports handled by K+N climbed by 12.1% in September, suggesting a late recovery in the quarter, including a 17.9% surge in shipments from Asia ex China.

The firm’s full year guidance for ocean freight of a 6% year over year drop implies a dip of 0.8% in Q4. That appears to be a markedly more conservative outlook than that provided by other forwarders including DP-DHL and DSV-Panalpina who have cited a continued recovery in volumes.
(Panjiva Research – Logistics)

European Union struggles to keep pace with global trade recovery
International trade in the EU is struggling to recover after COVID-19 industrial and commercial closures with total merchandise trade down by 4.6% year over year in August. Exports to outside the EU dropped by 14.8%, led by a slide in shipments to the U.K. and U.S.

The latter may include a marked decline in airfreight given seaborne imports to the U.S. from the EU have been improving. In dollar terms the EU’s exports fell by 8.7% year over year in August, bringing the global total across 37 countries plus the EU to a 5.4% decline for the month.

Early data for 15 countries that have reported September data shows an average increase for the month of 5.9% year over year, though that relies heavily on the recovery in Asia seen in China and India in particular.
(Panjiva Research – Macro)

Brexit Watch: EU automakers seek a route to lower tariffs
The European automobile manufacturers’ association, ACEA, has called on the EU to revise its stance in Brexit negotiations to allow a lower level of content to qualify for tariff-free rules. That’s hardly a surprise but comes very late in the negotiating process. The topic of content, or rules-of-origin, was central to USMCA negotiations and can have a profound impact on global supply chains. In the case of USMCA there was a marked tightening of the rules of origin, including specifics on steel and aluminum, though a phase-in period was included.

ACEA’s request also illustrates the challenges facing the long-term competitiveness of British industries should – as seems likely – no long-term trade deal be signed by the end of the year. On a related topic, discussions between EU and U.K. negotiators are reported to be continuing despite a lack of progress at the heads-of-state level last week.
(Financial Times, Bloomberg)

U.S. elections not just a calendar event for U.K. trade deal
U.K. Trade Minister Liz Truss has stated that the latest round of talks to form a trade deal with the U.S. including “intensifying negotiations so we are in a good position to move forward after the election“. The elections could prove to be a critical juncture for the negotiations. The Trump administration has TPA approval to formulate a track record, though there is a deadline of July to ensure an up-down vote in Congress. The latter may haggle over terms before voting on a deal, as was seen with the USMCA deal, which could take a year to deliver.

Should there be a Biden administration next year a deal should not be taken for granted. The Biden campaign has already indicated that the reformed Internal Markets Bill could jeopardize a deal if it leads to a hard border in the island of Ireland. Furthermore the campaign has indicated that trade deals won’t be an early priority, bringing the TPA end-date into play.
(HM Trade Minister)

No surprises, but action needed from U.S. cybersecurity report
The U.S. government’s “Cyberspace Solarium Commission” has identified a series of threats presented from China to U.S. information technology supply chains. The commission, set up under the National Defense Authorization Act of 2019, has made five key and eight supporting recommendations regarding actions the administration can take to bolster the security of supply chains.

Both the Trump and Biden campaigns have identified onshoring of critical industry supply chains as key policy objectives both in the jobs and geopolitical spheres. The two sides differ in their toolkits, with the Trump administration having relied in large part on tariffs to try and change import patterns. The CSC recommendations notably state theat “tariffs have failed to entice businesses to move supply chains stateside” and noted retaliation has cut GDP by 0.5% in 2020.
(U.S. Cyberspace Solarium Commission)

Just-in-time needs just-in-case cybersecurity
The Digital Container Shipping Association grouping of major container lines has launched a new set of data definitions for exchanging information for just-in-time port operations. The standards address the thorny issue of timestamps in shipping documentation to reduce friction in developing more accurate delivery services.

The increased use of IoT devices provides an opportunity to accelerate the digitization of the shipping industry, as outlined in a recent joint report with our colleagues from 451 Research. That process requires greatly increased spending on cybersecurity at the same time, as a series of liners, most recently including CMA CGM, have found.
(Digital Container Shipping Association)

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