Panjiva Blog: Blogging Global Trade

The word from the Panjiva research team: December was a surprisingly good month in the world of global trade.  Specifically, there was a 3% increase in the number of global manufacturers shipping to the U.S. market, as well as a 2% increase in the number of U.S. companies receiving waterborne shipments from global manufacturers. Traditionally, these numbers decline from November to December (-5% in 2008 and -1% in 2007).

To add to the good news:

• The percentage of significant manufacturers on the Panjiva Watch List declined from 25% to 23%
• Similarly, the percentage of significant buyers having done business with a Panjiva Watch List supplier in the preceding three months declined slightly from 35% to 33%.
• The number of waterborne shipments coming into the U.S. saw a 2% year-over-year increase in December — the first year-over-year increase since we began tracking year-over-year increases 18 months ago.

That said, year-over-year comparisons are going to be a bit misleading in the next few months — because, at this time last year, global trade was in free fall.  And the absolute level of global trade activity is still well below where we were before the 2009 recession.  So reports of a robust or sustained recovery are probably premature.  Nevertheless, it’s great to head into 2010 with the numbers heading in a positive direction.

Methodological notes for the data junkies:

• Manufacturers that have suffered a 50% or greater decline in volume shipped to American customers in the most recent three month period, versus the same period a year ago, are on the Panjiva Watch List.
• “Significant manufacturers” are companies that have sent 10 or more shipments to American customers within the last year.  As of the end of December, there were 86,794 significant manufacturers.
• “Significant buyers” are U.S. companies that have received 10 or more shipments from overseas manufacturers within the last year.  As of the end of December, there were 74,963 significant buyers.

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If the September decline in global trade is any indication, U.S. companies aren’t expecting many items to fly off the shelves this holiday season.  However, it certainly seems that U.S. companies are betting that Swine Flu will turn hand sanitizer into a holiday hit.

On Monday, over lunch, I told apparel industry veterans of a random warning I received about the dangers of ingesting hand sanitizer.  One of my lunchmates commented that he expected hand sanitizer to do quite well this year, thanks to the Swine Flu.  So, of course, I asked our research team to take a look.

Sure enough, there’s been a massive spike in shipments of hand sanitizer to U.S. companies, suggesting that American companies think they may have a holiday hit on their, um, hands.

Specifically:

• In the third quarter of 2009, there were 128 waterborne “hand sanitizer” shipments to the United States — compared to 56 shipments in the third quarter of 2008.
• When analyzed on a weight basis, there was a threefold increase in the amount of hand sanitizer shipped in the third quarter of 2009 — compared to the third quarter of 2008.

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The word from Panjiva’s research team: global trade activity declined in September.  Specifically, from August to September, there was a 5% decline in the number of global manufacturers shipping to the U.S. market. Similarly, there was a 4% decline in the number of U.S. companies receiving waterborne shipments from global manufacturers.

These declines are the steepest we’ve seen since February, when global trade hit bottom, and would seem to confirm that American businesses have modest expectations for the coming holiday shopping season.

Pessimists will take note that it was last year’s August-September decline that marked the beginning of global trade’s six-month decline.  However, we probably won’t see a repeat of last year’s global trade free-fall unless we get another macro shock to the financial system.  (For an interesting perspective on where we may be headed, check out the SpendMatters blog.)  A couple of positive items from our team’s latest analysis:

• The percentage of significant manufacturers on the Panjiva Watch List declined slightly from 28% to 27%.
• Similarly, the percentage of significant buyers having done business with a Panjiva Watch List supplier in the preceding three months declined slightly from 38% to 37%.

Methodological notes for the data junkies:

• Manufacturers that have suffered a 50% or greater decline in volume shipped to American customers in the most recent three month period, versus the same period a year ago, are on the Panjiva Watch List.
• “Significant manufacturers” are companies that have sent 10 or more shipments to American customers within the last year.  As of the end of August, there were 86,663 significant manufacturers.
• “Significant buyers” are U.S. companies that have received 10 or more shipments from overseas manufacturers within the last year.  As of the end of August, there were 73,904 significant buyers.

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The word from Panjiva’s research team: global trade activity held steady in August.  Specifically, from July to August, there was a 1% increase in the number of global manufacturers shipping to the U.S. market.

Reasons for optimism:

• This year’s July-to-August increase compares favorably to numbers from 2008 (1% decrease) and 2007 (1% decrease)
• The percentage of significant manufacturers on the Panjiva Watch List declined to 28% — down from 29% in July.
• The percentage of significant buyers having done business with a Panjiva Watch List supplier in the preceding three months declined to 38% — down from 40% in July.
• From July to August, there was a 1% increase in the number of U.S. companies receiving waterborne shipments from overseas.

As we look ahead, it’s worth remembering that September is when global trade fell off a cliff last year.  For the remainder of 2009, there are three possible trajectories for global trade:

• Cliff-diving — If we have a new shock to the financial system, look for global trade to go off a cliff for a second year in a row.  Low probability (we hope).
• Holiday surge — If retailers bet on strong consumer spending in the holiday season, look for global trade to surge in the months ahead.  Anecdotal evidence suggests that corporate buyers are being cautious (better to be burned by having too little inventory than by having too much), so a holiday surge is unlikely.
• Holding steady — Probably the best bet.  Over the last several months, we’ve seen a slow but steady recovery of global trade activity.  No reason to think we won’t see more of the same.

Of course, we’ll see soon enough.  In the meantime, methodological notes for the data junkies:

• Manufacturers that have suffered a 50% or greater decline in volume shipped to American customers in the most recent three month period, versus the same period a year ago, are on the Panjiva Watch List.
• “Significant manufacturers” are companies that have sent 10 or more shipments to American customers within the last year.  As of the end of August, there were 86,686 significant manufacturers.
• “Significant buyers” are U.S. companies that have received 10 or more shipments from overseas manufacturers within the last year.  As of the end of August, there were 73,683 significant buyers.

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Thanks to Paul Kedrosky for highlighting Ambrose Evans-Pritchard’s article about China’s plans to limit exports of rare earth minerals.

Specifically, there’s discussion of limiting exports of terbium, dysprosium, yttrium, thulium, lutetium, neodymium, europium, cerium, and lanthanum.  We took a look at who’s sending shipments to the United States that include these rare earth minerals.  Results below:

• 3 suppliers of products including terbium
• 5 suppliers of products including dysprosium
• 54 suppliers of products including yttrium
• 1 supplier of products including thulium
• 8 suppliers of products including lutetium
• 41 suppliers of products including neodymium
• 12 suppliers of products including europium
• 85 suppliers of products including cerium
• 121 suppliers of products including lanthanum

If you dig into the searches, you can see the geographic distribution of these suppliers.  Some are the original suppliers; others are middlemen.

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Earlier this week, Panjiva released data showing that the number of global manufacturers serving the U.S. market increased 7% from June to July.  Here’s a sampling of the press coverage of Panjiva’s latest analysis:

The New York Times: “In July, the number of overseas manufacturers sending shipments to the United States increased by 7 percent, according to the private firm Panjiva, which tracks shipping.”

BusinessWeek: “International shipments to ports have been on the rise since bottoming out in February at 120,000, the lowest since Panjiva started tracking in July 2007.”

Supply Chain Management Review / Logistics Management: “Said Green…  ‘There is no question we are still vulnerable to additional shocks.’”

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The word from Panjiva’s research team: there was a significant uptick in trade activity during July.  Specifically, from June to July, there was a 7% increase in the number of global manufacturers shipping to the U.S. market.

Further reason for optimism:

• The percentage of significant manufacturers on the Panjiva Watch List declined slightly to 29%.

Pessimists, take note:

• Seasonality — Last year, from June 2008 to July 2008, there was a 6% increase in the number of global manufacturers shipping to the U.S. market, indicating that there may be a strong seasonal component to this year’s increase.
• Vulnerability — Last year’s increase preceded the free fall in global trade that unfolded from July of 2008 through February of 2009; if we were vulnerable to shocks this time last year, we’re even more so this year.
• Low absolute level of activity — The number of companies shipping to the U.S. is about 10% down from where we were this time last year.
• High absolute level of risk — The percentage of significant buyers having done business with a Panjiva Watch List supplier in the preceding three months remained steady at 40%.

Methodological notes for the data junkies:

• Manufacturers that have suffered a 50% or greater decline in volume shipped to American customers in the most recent three month period, versus the same period a year ago, are on the Panjiva Watch List.
• “Significant manufacturers” are companies that have sent 10 or more shipments to American customers within the last year.  As of the end of July, there were 86,570 significant manufacturers.
• “Significant buyers” are companies that have received 10 or more shipments from overseas manufacturers within the last year.  As of the end of July, there were 73,570 significant buyers.

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In honor of the 40th anniversary of the moon landing, we took a look at what NASA imports.  Turns out the space agency has received about thirty waterborne shipments from overseas in the last two years.

Not surprisingly, phrases that appear most frequently in the descriptions of shipments to NASA include “electronic equipment”; “scientific equipment”; and “antenna.”

Does the small number of shipments from overseas suggest that NASA buys American?  It would seem so.  But it’s a safe bet that NASA’s American contractors have global supply chains.  After all, the globalization of high tech manufacturing is one of the many things that has changed in the last four decades.

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The word from Panjiva’s research team: June trade data looked a lot like May trade data.  Specifically, between May and June, there was a 1% decline in the number of global manufacturers shipping to the U.S. market.

Similarly, the Panjiva Watch List numbers were unchanged:

• The percentage of significant manufacturers on the Panjiva Watch List remains at 30%.
• The percentage of significant buyers having done business with a Panjiva Watch List supplier in the preceding three months remains at 40%.

What to make of these numbers?  The slight decline from May to June is slightly less than last year’s May-to-June decline (2%).  Thus, it seems that global trade now appears to be tracking its typical seasonal path, albeit at a lower absolute level of activity.  Feels a bit like the global economy is treading water.

Methodological notes for the data junkies:

• Manufacturers that have suffered a 50% or greater decline in volume shipped to American customers in the most recent three month period, versus the same period a year ago, are on the Panjiva Watch List.
  
• “Significant manufacturers” are companies that have sent 10 or more shipments to American customers within the last year.  As of the end of June, there were 86,616 significant manufacturers.
• “Significant buyers” are companies that have received 10 or more shipments from overseas manufacturers within the last year.  As of the end of June, there were 72,850 significant buyers.

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Earlier today, Lear Corp., a major supplier to the auto industry, filed for bankruptcy protection.  Lear has a global supply chain, so the Panjiva research team took a look at its shipment history to see if there were tell-tale signs of the company’s demise.  See below.  Major drop-off in January, and it moved onto the Panjiva Watch List in February.

See our previous analyses of other bankruptcies in the auto industry.

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