May 2016 | News | Global Logistics

Global Logistics—May 2016

Tags: Global Logistics, Logistics, Supply Chain

Earthquakes Shake Up Global Supply Chains

The global supply chain is still feeling the aftershocks of a 6.5-magnitude earthquake that struck Japan on April 14, 2016, followed by a 7.3-magnitude earthquake two days later on Japan's island of Kyushu.

With property and local infrastructure severely damaged, many companies will continue to feel the effects in the coming months. Kyushu is a major manufacturing hub, so the companies below are only a few among dozens more—primarily automotive and electronics manufacturers and suppliers—that have experienced shutdowns, delays, and interruptions as a result of the earthquakes.

Toyota Motor Corp. Toyota's supply chain is often viewed as something to aspire to, but its tight schedules leave little room for interruption. Due to supplier shutdowns caused by the earthquakes, Toyota was forced to temporarily close 26 assembly plants across Japan. Morgan Stanley estimates the closures will cost Toyota about $277 million.

Honda Motor Co. Honda was forced to shut its motorbike plant in Kumamoto for a few days, but most of its plants in southern Japan stayed open despite the crisis.

General Motors Co. The U.S. automaker shut down four plants in the United States for two weeks while it assessed the effects of the earthquake on its supply chain. "This temporary adjustment is not expected to have any material impact on GM's full-year North America production plans or results," the company said in a statement.

Sony Corp. Sony temporarily closed its Kumamoto and Nagasaki plants, which manufacture image sensors for smartphones, including Apple's iPhone. "We are not expecting any immediate supply disruption as we have some inventories right now," a Sony spokesman told Reuters.

Can Trade Weather Climate Change?

Add climate change to the factors that shape global trade. A permanent change in the weather can redirect trade flows, raise the price of goods, and create openings for new products. Research from Datamyne shows six current cases of climate change impacts on trade:

  1. Gulf Coast wetlands are slipping away—and with them the habitats that support shellfish and other seafood. The United States has been turning to imports to meet demand for shrimp.
  2. Ocean waters are becoming more acid—and lethal for oysters. Rising U.S. imports of oysters are one result.
  3. Warming temperatures are bad for coffee beans, and good for plant-killing fungus and beetle infestations. The shape of things to come: a disappointing crop depresses Costa Rican coffee exports, while coffee prices rise.
  4. Some plant species grow in South Africa and no place else. One is rooibos (or red bush) tea. Drought has decimated the 2015 crop and South African export shipments.
  5. A shift to a droughtier climate will also have an impact on the way your beer tastes: the European harvest of hops, including Germany's hallertau hops, was disappointing last year, so brewers are paying more (as the trade data indicates) or finding alternatives.
  6. Warmer temperatures are creating a more hospitable climate for UK vintners, and the United States is importing more English wine.

Does Africa Still Offer Opportunity?

Africa has often been referred to as one of the last frontiers for economic growth and development. Given the recent economic downturn and headwinds that the continent is experiencing, however, does the region still offer opportunity for investors?

In 2015, Sub-Saharan Africa's real Gross Domestic Product (GDP) grew at its lowest rate, 3.4 percent, since 2009, reports the World Bank's January 2016 Global Economic Prospects. This was down from the 4.6-percent and 4.9-percent growth that was reported in 2014 and 2013, respectively.

One company—DHL Express—firmly believes that the African continent will continue to grow as it has over the past decade due to the vast number of unexploited opportunities available for local and foreign investors.

"The drop in GDP growth for the region over the past year shouldn't deter investors," says Hennie Heymans, managing director of DHL Express Sub-Saharan Africa. "Africa will continue to thrive, albeit at a slightly slower pace than previously experienced."

Economically, 2015 was a tough year for Africa. A drop in demand for the continent's commodities, in addition to falling prices, declining currencies, political instability and widespread drought caused by El Niño have all contributed to the region's challenges. Despite this, "the region abounds with untapped prospects and offers growth opportunities in 2016 for those willing to seek them out," says Heymans.

The latest World Bank Africa's Pulse, an analysis of economic trends and data, supports Heymans' claim. "The good news is that domestic demand generated by consumption, investment, and government spending will nudge economic growth upwards to 4.4 percent in 2016, and to 4.8 percent in 2017," says Punam Chuhan-Pole, author of the report and acting chief economist for the World Bank Africa Region.

Some regions have higher growth prospects than others, according to the World Bank report. Cote d'Ivoire, Ethiopia, Mozambique, Rwanda, and Tanzania are expected to sustain growth of approximately 7 percent per year in 2015-2017, thanks to large-scale investments in resources, energy and transport projects, and consumer spending.

More countries in the region could be thriving if not for underdeveloped infrastructure and bureaucracy. Heymans points to the mining sector in Madagascar as one example. "This could be a potentially lucrative opportunity for investors due to the country's coal, nickel, and ilmenite resources," he says. "However, several legislative reforms are still needed.

"The opportunities are clearly there; it's all about having a long-term, sustainable focus on the region," Heymans says. "As we move into the second quarter of 2016, DHL Express will continue to invest in the Sub-Saharan Africa region, with the ultimate goal of seeing the continent thrive."

Booming e-Commerce Sales Drive Intra-Asia Trade, Logistics

Intra-Asia trade will increasingly benefit from the rapidly growing consumption in Asia, as more cargo is shipped to end markets in the region instead of to destinations in other parts of the world, according to the latest IHS Global Insight report. In addition, rising consumption trends in Asia Pacific will benefit intra-Asian trade, and e-commerce shipping and logistics.

Among the report's key points:

  • Consumption in Asia Pacific as a share of world consumption will rise from 27 percent in 2016 to 39 percent by 2035, driven by the fast-growing number of middle-class households in emerging Asia, notably China, India, and Indonesia.
  • Intra-Asia containerized trade to and from China dominates all other container trade lanes in terms of volume, and is forecast to grow at 5.1 percent per year over the medium-term outlook to 2018.
  • Total containerized trade in East Asia is forecast to rise from 25.9 million TEUs in 2014 to 31.6 million TEUs by 2018.
  • Chinese online retail sales of goods and services in Q1 2016 reached US $158 billion, up 27.8 percent year-on-year, driving rapid growth in China's logistics sector.
  • India's e-commerce market is much smaller than China's, but is growing rapidly, with e-commerce sales estimated to have risen from US $4 billion in 2009 to US $40 billion in 2016, helped by strong sales of smartphones and tablets. In Q1 2016, sales of smartphones in India grew by 23 percent year-on-year, with Indian consumers becoming avid users of these devices to make online purchases.
  • The Indonesian e-commerce market is estimated to be worth US $6 billion in 2016, dominated by e-sales for travel, particularly airlines and hotels. Indonesia will grow at about five percent annually over the next decade, with GDP forecast to reach US $3.8 trillion by 2030, up from US $930 billion in 2016.





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