April 28, 2024
Here it is for this week…
1: A lack of seats is impacting airline’s ability to upgrade planes
Summary: Airlines are struggling to get seats and refurbish planes due to supply chain constraints.
Analysis: Supply chain challenges have existed for the last several years, and will continue for longer. Mismatched supply vs. demand, cost increases, labor challenges, and more are contributing to the problem, and there is no end in sight.
2: Chinese firms are rapidly investing abroad
Summary: Chinese firms invested $33.5B US overseas in Q1.
Analysis: Chinese firms also want to “de-risk” from China, as well as have other options such as a way to hedge currency risks. It is also expanding Chinese influence broadly across large portions of the supply chain in many industries, including those of the future such as semiconductors, green energy, and EVs.
3: BYD charges double for its cars overseas
Summary: BYD is charging almost double when its cars are sold overseas.
Analysis: China has a major price war for cars, not just EVs, but ICE engines (gasoline) cars as well. BYD can buttress some of this impact by selling at higher margins overseas, and it also mollifies some of the criticism that it is dumping EVs into overseas markets.
4: China passed a tariff law aimed at thwarting tariffs aimed at it
Summary: “The law …. outlines a range of legal provisions related to tariffs on Chinese imports and exports, from what constitutes tax incentives to China's right to hit back at countries that renege on trade agreements.”
Analysis: Just as the US uses Section 301 of the Trade Act of 1974 to go after unfair trade practices, China did not have a codified response mechanism, until now. Watch for this to be deployed as trade tensions escalate, to push back and/or nullify any potential threats the country might face.
5: Ship maintenance and repair is big business, with a new IPO
Summary: HD Hyundai is filing for an IPO to build out its ship repair business.
Analysis: Maintaining ships and repairing them is a profitable business, and crucial to supply chains. As more ships come online, supply chain shipping is becoming more ingrained (vs. other forms of transportation), and these kinds of companies are looking to make long-term investments to take advantage of the trend.
Something unique…
The collapse of a bridge in Baltimore disrupted many different supply chains, including coffee! The port of Baltimore was a key offload point for Compass Coffee, a common coffee shop in the District. When that option wasn’t available, it was sent to the New York area, but secondary effects started occurring such as longer delivery times, some products being out of stock, and uncertainty about when it would return to normal. For now, at least, prices are stable. My question is - will they have pumpkin spice later this year!??