April 21, 2024
A weekly update on the supply chains and other stories…
1: US-China relations are "more stable" but work is needed
Summary: Relations are more stable than a year ago, but a lot more work is needed especially in Chinese overcapacity and industrial policy.
Analysis: The US-China relationship is stable, but not great. Both sides are trying to keep stability until after the 2024 election.
2: One VC group is attacking regulations, by investing in companies
Summary: A VC firm invests in companies where gov. regulations are a problem, and then helps to change those regulations.
Analysis: Interesting business model. Invest in firms that have challenges with government regulations (making their valuations lower), and then help overcome those regulations and take profits after resolving the problem. An interesting way to cut through bureaucracy as well.
3: US & UK to ban exchanges from trading Russian metals
Summary: Both countries are trying to limit aluminum, copper, and nickel to further deprive Russia of revenue. This is a change from the current steep tariffs imposed.
Analysis: It has been rough for those who are trying to stop the flow of revenue and resources to Russia. It has been a haphazard approach, and one that has hurt many (just ask the Germans about the cost of gas and electricity). China has been a key player in this and has sold and bought Russian goods and materials cheaply. The Shanghai commodity exchange is now the only one in the world that sells Russian copper, aluminum, etc., and sales are brisk.
4: China exports rise in Q1, as tensions grow
Summary: Export volumes increased compared to 2023.
Analysis: 2023 is a poor metric to use. We need to go to 2019 to see the growth. There are fears of overcapacity and a flood of cheap Chinese goods, but this has been around for over a decade, such as with steel. The key to understanding Chinese data is what areas is the government focused on (subsidies, legislation, etc.), and what areas are not. For example, now that real estate is not a focus, what are the next drivers(s) of growth? You cannot export real estate, but you can components of its supply chains (steel, cement, etc.). Breaking down the products that fit into each product/supply chain/industry will be a far better metric than comparing export numbers or GDP.
5: The future is on barges, in France
Summary: Some logistics in France are using the age-old method of shipping on barges via rivers.
Analysis: As carbon reduction and potential carbon schemes come further into play in the logistics industry, companies are looking for ways to cut costs and be more sustainable. River shipments are one of those options.
Something unique… The chicken is in NYC, and the cashier is in the Philippines
Another day, another story on automation or offshoring. Overseas “virtual assistants” are being used to cut costs and provide services to US customers, even at restaurants. The rate for this assistant in NYC is roughly $3/hour, far below current wage laws that apply only to physical employees within the state. Look for this, and many other ways, businesses are going to cut costs.