☕️ No Money, Mo' Problems

Happy Hump Day. Yellow Corporation ($YELL) has 1 month of cash left, the first space factory is now in orbit and will soon begin producing pharmaceuticals, and US-China trade dynamics are quickly reshaping.

In today's email:

• Three Freight Headlines: Maersk-owned company fined for retaliation against a US shipper, freight spending could decrease 20% in 2023, and Yellow Corp. faces a financial crisis.
• Shifts in US-China Trade Over 20 Years
• Around the Freight Web: California-based company aims to manufacture pharmaceuticals in space, drought leads to fears of soaring food prices, inflation drops to 4%, plus more.

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🐔 WHAT’S COOKIN’ IN FREIGHT

💸 Hamburg Süd Fined $9.8M for Retaliation Against US Shipper. The US Federal Maritime Commission (FMC) has ordered Maersk-owned operator Hamburg Süd to pay US furniture shipper OJ Commerce (OJC) $9.8 million after it denied contracted cargo space to the company. The FMC ruled that Hamburg Süd violated provision 41104(a)(10) of the US Shipping Act, which prohibits carriers from refusing cargo space in retaliation against a shipper for filing a complaint. Evidence showed that Hamburg Süd knowingly denied space for OJC's containers as a retaliatory move for potential litigation.

📉 May 2023 Freight Report Overview. The Cass Freight Index reported a slight monthly increase in shipments but an overall year-on-year decrease, reflecting a downward trend in the freight market influenced by a drop in real retail sales and ongoing destocking. The expenditure component saw a considerable decline, with a predicted ~20% drop in freight spending for the year.

🚛 Yellow Corp. Has A Month of Cash Left. Yellow Corp., the less-than-truckload carrier, is reported to be out of cash by August, unless a proposed change of operations gets approved. However, the Teamsters union, asserting years of company mismanagement, refuses to bail out Yellow again. Yellow had previously received billions from the union and a $700 million COVID-relief loan from the government. The proposed changes would allow Yellow to expand purchased transportation and alter work rules, which the union claims violate the current contract.

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4 KEY TAKEAWAYS FROM US-CHINA TRADE OVER 20 YEARS

1. China's diminishing dominance in U.S. trade. China, once the top non-North American trading partner with the U.S., has seen its market share gradually decline since 2010. In that year, China had a 44.5% share, which even rose to 50.1% with the inclusion of Hong Kong. However, post a spike in 2018 due to increased tariffs, China's share fell to 35.8% in 2023.
2. Mixed bag for China in Top Commodity Categories. Analyzing the top 10 U.S. import categories (2-digit HS codes) between 2016 and 2022, China showed growth in seven categories but lost market share in five. Despite these shifts, China retained its status as the dominant Country of Origin (CoO) in eight out of the ten categories.
3. South and Southeast Asian countries on the rise. Over this period, South and Southeast Asian nations like India, Bangladesh, Vietnam, Thailand, and Indonesia showed significant growth, snatching import share from China. On the other hand, mature markets such as Europe, South Korea, and Japan did not experience such a shift.
4. Category-specific shifts in market share. Each category revealed different trends. Notably, HS-94 (Furniture, Bedding, etc.) imports from China grew 5%, but its share decreased by 17.3%. Vietnam saw the most growth in this category, with a whopping 186.3% increase. Similarly, HS-85 (Electronic Machinery, Sound Equipment, TV Equipment, etc.) observed remarkable growth from Vietnam at 556.3%. Other categories such as plastics and vehicles & parts also showed notable shifts in market share among different countries.

Looking ahead, these changes in the U.S.-China trade landscape could have profound implications for the global economy and international trade. It will be interesting to see how these dynamics continue to evolve over the coming years.

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AROUND THE FREIGHT WEB

💊 Varda's Space Factory Begins Zero-Gravity Drug Production. Varda Space Industries has launched a factory into space with SpaceX to manufacture pharmaceuticals in zero-gravity conditions, initiating a new era of zero-gravity supply chains.

🇲🇽 Toyota's $328M Hybrid Venture in Mexico. Toyota is investing $328 million to produce a new hybrid model of the Tacoma pickup truck at its plant in Guanajuato, Mexico, which is becoming a significant hub for electric and hybrid vehicle manufacturing.

🌽 U.S. Drought Sparks Fear of Soaring Food Prices. Drought conditions are devastating U.S. corn and wheat crops, which along with other factors, will contribute to a sharp rise in food prices amidst the worst global food crisis in modern history.

🥚 Egg Prices Experience Largest Monthly Drop in Over Seven Decades. The price of a dozen Grade-A eggs dropped by 60 cents in May, marking the largest monthly decrease since 1951 and resulting in a current average price of $2.67, despite overall grocery prices seeing a slight increase.

🚂 U.S. Rail Carloads Up Slightly, Intermodal Continues Decline. U.S. rail carloads saw a slight increase of 0.8% in May 2023 compared to May 2022, while intermodal originations experienced a 15th consecutive year-over-year decline of 11.1%.

📉 Steady Deceleration of Inflation. Over the course of a year, the annualized inflation rate exhibited a consistent downward trend, decreasing from 9.06% in June to 4.05% in May.

FREIGHT MEME OF THE DAY