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Brexit Watch: BP, Shell Provide Temporary Boost to British Exports

Brexit 113 China 2150 Cons. Discr. - Autos 778 Energy - Conventional 331 Energy - Crude Oil 224 Health Care 138 Trade Balance 773 U.S. 3910 United Kingdom 238

The British Parliament has been suspended until Oct. 14, the BBC reports, following the passage of legislation to require the government to request an extension to Brexit if a deal isn’t reached with the EU by Oct. 19. There is the possibility of a legal challenge by the government, according to the Financial Times, as well as the potential that EU member states block the attempt to get an extension. 

In that regard, the level of political certainty for industrial supply chains is only a little higher than it was at the start of the Johnson administration.

Panjiva’s analysis of official data shows U.K. international trade activity improved by 2.5% year over year in July, led by a 5.8% surge in exports while imports rose by just 0.1%. Both represent an improvement from the second quarter when total trade fell by 1.2%.

That masks a continued downturn in trade with the EU, with exports that fell 3.8% year over year in July compared to 4.6% in 2Q while imports fell 1.5% versus a 7.5% slump in the prior three months.

EXPORTS OUTSIDE THE EU SAVED BRITAIN’S BACON IN JULY

Chart segments change in British trade in goods by direction and destination. Calculations based on ONS data for exports and imports.  Source: Panjiva

The return to growth is largely down, therefore, to a 15.1% jump in exports to countries outside the EU. That represented the seventh straight month of growth, and may be linked to a continued decline in sterling. The most significant improvements include a 75.8% surge in shipments to China, equivalent to 46.3% of the sterling increase in trade, and a 21.6% rise in exports to the U.S. which represents 42.4%.

Around two-fifths of the increase in exports to China were accounted for by a 305% surge in crude oil shipments while just under 10% was due to a 434% jump shipments of power generating equipment. 

In the case of exports to the U.S. in dollar terms, Panjiva’s data shows the top three areas of growth included: a 98.1% jump in shipments of pharmaceuticals to $389 million; a 191.1% climb in exports of crude oil to $268 million; and a 21.7% increase in shipments of cars and light trucks.

It’s not immediately clear that any of those growth streams will prove sustainable. As outlined in Panjiva’s research of Sept. 9 the surge in auto shipments may reflect a bounce in sales in August and face threats from the section 232 review of the industry in November. Shipments of pharmaceuticals meanwhile may face a challenge from long-awaited healthcare pricing reforms.

JULY’S EXPORT BOUNCE DRIVERS MAY PROVE TEMPORARY

Chart compares U.S. imports of pharmaceuticals, crude oil and autos from the U.K. on a monthly and three-month average basis.  Source: Panjiva

Shipments of crude oil meanwhile can prove volatile – Panjiva’s seaborne shipping data shows U.S. imports from the U.K. may have fallen by 14.8% in August – and are partly a function of differential pricing spreads as much as fundamental demand. 

Shipments associated with BP plc may have had the largest volume among the major shippers in the 12 months to Aug. 31,with 30.8% of total shipments after a 85.7% year over year  jump in July and 9.3% in August. That was followed by imports by Royal Dutch Shell representing 17.4% and EnQuest with 8.7% of the total – though neither appears to have made significant shipments in August.

BP ACCELERATES SHIPMENTS TO THE U.S., SHELL LOOKS LESS SURE

Chart compares U.S. imports of crude oil by sea from the U.K. by BP plc, Royal Dutch Shell and EnQuest on a monthly and three-month average basis.  Source: Panjiva

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