Companies betting on demand rebound in second half of year, DHL says

A cargo aircraft in DHL livery passes near a FedEx livery plane parked at a FedEx regional hub, at Los Angeles International Airport (LAX) in Los Angeles, California, September 16, 2022.

Bing Guan | Reuters

Spring has sprung for U.S. imports, and the trade that is being exported from China is centered on the items you would expect to be selling even in a lower demand environment.

In peak housing season and ahead of summer, it’s wrought iron outdoor furniture, bookcases, doors, and household items such as lamps that are the top items coming into the country, according to data from ImportGenius and bills of lading, which are the customs paperwork which details the products in containers.

That marks the second consecutive month that U.S. imports increased and are higher than 2019 levels, according to data provided to CNBC from Descartes Datamyne, a global trade data platform. The combination of a slow ramp up from “Zero Covid” in China and the reopening of manufacturing plants in the country delayed exports.

But Tim Scharwath, Global CEO for DHL Global Forwarding, said the overall import trade trend remains soft, and it will take time for volumes to come back as retailers are still trying to pare down their inventories.

Indeed, Berkshire Hathaway chairman and CEO Warren Buffett, who oversees a sprawling network of independently run retail companies, said at his company’s annual meeting last week, “It is a different climate than it was six months ago. And a number of our managers were surprised. Some of them had too much inventory on order, and then all of a sudden it got delivered, and people weren’t in the same frame of mind as earlier. Now we will start having sales when we didn’t need to have sales before.”

“It’s more important to talk to customers at the moment and listen to what they are saying,” Scharwath told CNBC. “They are all pushing for the second half. It doesn’t matter what industry they are in. They’ll say please be patient. We see our booking volumes increasing the second half of the year. I don’t think that June, July will show any kind of big increase.”

Compared to 2022 specifically, he said, there is a sharp double-digit decline, mainly driven by the drop in demand as a result of high energy prices and inflation. “I hope consumption in the U.S. goes up again and that the inventory levels start to really go down,” Scharwath said.

Ocean orders from SONAR show a slight uptick in future ocean freight bookings.

Even with the Covid crisis declared over from a health standpoint, Scharwath said supply chain issues remain a headwind for overall trade volume.

“Another issue some of the large retailers and large manufacturers have is the management of their supply chains. You can lose products in the supply chain because of the different warehouses and vendor storage. That’s why for example you couldn’t get certain pairs of sneakers last year in certain colors because they could not locate them in their storage supply chain,” he said.

There have been big shifts in manufacturing locales across Asia, as DHL tracks growing volumes out of Vietnam, Malaysia and Thailand, and companies including Foxconn and Samsung move some of their manufacturing out of China into Vietnam.

“It is not a lot of volume where China needs to be worried because of the amount of manufacturing they export, but we are seeing more higher-quality technical products moving to other ‘China Plus’ countries,” Scharwath said. “Phone manufacturers and tech manufacturers are moving more into into that part of the world to manufacture their products. Manufacturers like Foxconn have the ability to build their products in any part of the world as long as they can get a workforce they can train to use their machines. We are going to see those kinds of products moving now more and more.”

The top Vietnamese imports in the latest data are wrought iron fencing and plant stands, imported for companies including Home Depot. Black jewelry bags for Zales and men’s and boy’s t-shirts for Nike rounded out the list of U.S. imports data from China, Vietnam, Thailand, and India reviewed by CNBC.

Taiwan imports had no breakaway product leader. Vehicles, parts, machinery, and plastics were the top product categories.

India’s trade growth

The India exports story is one of the most notable, as companies including Apple and Boeing talk about both the manufacturing and consumer opportunities in the nation. But for now, it’s an assortment of lesser-known consumer and industrial items leading the way.

In April, the trade data shows that vitamins and containers of pencils were bound from India to Walmart, and zip polos and t-shirts for Guess. The largest volume of products imported into the Port of Houston from India were bundles of Zenith Brand high frequency induction-welded set pipes.

Scharwath said with India Prime Minister Narendra Modi’s central government taking a heavier hand with the economy, it is becoming attractive for companies to invest there.

“This has become interesting because of the growing Indian market,” he said of India’s trade growth. “The market of the middle class there will want to have certain luxury goods. Apple is a famous example of a company now moving into India. I think India will win over the long term. If India stays on track they are able to attract more business; they will also attract more infrastructure capacity into the country.”

But he pointed to a few big logistics issues that India still has to solve. “Ocean is halfway okay. Air freight is a different story. India does not have a good passenger airline or a good air freight airline,” he said.

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