In the world of corporate mascots, few are as emblematic as the furry pink rabbit wearing sunglasses and sandals and beating a marching band drum. While the Energizer Bunny may never tire, will Energizer Holdings\u2019 (EH) prospects remain as resilient in the face of escalating rivalries between China and the USA<\/p>\n
Energizer Holdings is one of the world\u2019s largest manufacturers of household consumer batteries with revenues of $1.6Bn in 2016 and a market cap of $2.5Bn [1]. Energizer is headquartered in St. Louis, Missouri and operates six manufacturing facilities in the United States, two in China, and one each in Singapore and Indonesia respectively [2]. Facing declines in industry demand for consumer batteries and strong price competition from lower cost carbon-zinc no-name brand substitutes, Energizer has sought to differentiate itself with the \u201cEnergizer Ultimate Lithium\u00ae, the world\u2019s longest-lasting AA and AAA battery\u201d [3]. These lithium-ion batteries (LIB) command a 16% price premium over Energizer\u2019s traditional alkaline based battery offering [4]. LIB anodes contain graphite and cathodes contain cobalt. The chemical properties of these materials directly contribute to the superior performance of LIBs and cannot be easily substituted. <\/p>\n
Global cobalt and natural graphite mining is highly concentrated. The Democratic Republic of Congo (DRC) produces 50% of cobalt and China produces 65% percentage of natural graphite [5]. The linkage of LIB manufacture to the relative instability of the DRCs tumultuous political environment is no doubt a considerable source of risk to EH\u2019s supply chain but beyond the scope of this analysis. China currently provides 34% percent [6] of all natural graphite imports into the U.S. and is therefore assumed to be the critical source of natural graphite for EH\u2019s LIB manufacturing operations in the United States. Pursuant to the most recent United States International Trade Commission tariff schedule, graphite products may be imported tariff free from WTO member nations and is subject to a 40% tariff otherwise [7]. Predicting the likely impact of the Trump administration\u2019s escalation of acerbic anti-Chinese rhetoric is therefore fundamental to EH appropriately understanding and mitigating its supply chain risks.<\/p>\n
In 2001, after a period of protracted negotiations, China was admitted to the World Trade Organization (WTO) [8] Favorable reciprocal tariff schedules assured, Chinese exports to the U.S. began to rise rapidly. The country\u2019s share of global US manufacturing imports doubled to 23.1% in 2011. The sharp increase in the import of Chinese manufactured goods has been estimated to have cost U.S. manufacturing half a million jobs in directly impacted industries, and a further 1.5 million jobs when considering upstream and aggregate demand effects [9]. Whether the savings gains from outsourcing companies have been sufficient to absorb this labour market shock remains an open topic of debate within the economics community. A strong argument can, however, be made that this adjustment has disproportionately benefitted the higher skilled portion of the workforce and disadvantaged the American manufacturing worker [10].
\nWhile the economists debate Keynesian multipliers and labour market elasticity, the American public has made up its mind. In a 2011 poll \u201c61% of Americans said that China’s recent economic expansion had been bad for America.\u201d [11] These political sentiments have translated directly into anti-China rhetoric from the administration. Peter Navarro, currently serving as the Assistant to the President, Director of Trade and Industrial Policy, and the Director of the White House National Trade Council produced the popular documentary \u201cDeath By China: How America Lost Its Manufacturing Base\u201d and wrote the book titled \u201cThe Coming China Wars: Where They will be Fought, How They can be Won\u201d. Robert Lighthizer, the US trade representative has long been a vocal critic of the WTO [12]. The argument of the Trump administration rests primary on the assertion that China has applied implicit subsidies to local manufacturers through the provision of subsidized capital, currency manipulation, and overly lax environmental standards. <\/p>\n
Thus far, the US administration have acted on their rhetoric through pursuing unilateral investigations into specific instances of what it perceives as particularly egregious fair-trade violations. This will not come to include natural graphite given the lack of a domestic producer. The current strategy of the administration, therefore, poses limited risk to EH. The risk however, remains that the current strategy will escalate to a broader \u2018trade war\u2019 with accompanying across the board tariffs. EH has already established manufacturing facilities in China which should serve to sufficiently mitigate what small risk exists.<\/p>\n
Given the raised prospects of targeted American protectionism of domestic manufacturing with respect to Chinese competition, and the continued headwinds in consumer batteries, should EH consider investing in local manufacturing of industrial grade lithium ion batteries?<\/p>\n
\u2003
\nWorks Cited
\n[1] Deutsche Bank Markets Research, \u201cGrowing like Rabbits,\u201d February 01, 2017.
\n[2] Energizer Holdings, 2016 Annual Report, p. 20
\n[3] Energizer Holdings, 2016 Annual Report, p. 5
\n[4] Amazon.com price comparison. 15 November 2017
\n[5] Elsa A. Olivetti, Gerbrand Ceder, Gabrielle G. Gaustad, Xinkai Fu, Lithium-Ion Battery Supply Chain Considerations: Analysis of Potential Bottlenecks in Critical Metals, In Joule, Volume 1, Issue 2, 2017, Pages 229-243, ISSN 2542-4351, https:\/\/doi.org\/10.1016\/j.joule.2017.08.019, accessed November 2017
\n[6] U.S. Geological Survey, Mineral Commodity Summaries, January 2017
\n[7] Official Harmonized Tariff Schedule 2017, U.S International Trade Commission
\n[8] \u201cAll change,\u201d The Economist, December 10, 2011, http:\/\/www.economist.com\/node\/21541448, accessed November 2017
\n[9] Acemoglu, Daron et al. \u201cImport Competition and the Great US Employment Sag of the 2000s.\u201d Journal of Labor Economics 34.S1 (2016): S141\u2013S198
\n[10] http:\/\/marginalrevolution.com\/marginalrevolution\/2017\/03\/dissent-china-trade-shock.html
\n[11] \u201cAll change,\u201d The Economist, December 10, 2011, http:\/\/www.economist.com\/node\/21541448, accessed November 2017
\n[12] Donnan, Shannon. \u201cTrump trade tsar warns against China \u2018market economy\u2019 status,\u201d The Financial Times, December 10, 2011, https:\/\/www.ft.com\/content\/4d6ba03e-56b0-11e7-9fed-c19e270000, accessed November 2017FT 5f<\/p>\n","protected":false},"excerpt":{"rendered":"
A brief examination of recent trends in American trade policy through the lens of a domestic consumable battery manufacturer<\/p>\n","protected":false},"author":10422,"featured_media":26302,"comment_status":"open","ping_status":"closed","template":"","categories":[3877],"class_list":["post-26301","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-global-trade","hck-taxonomy-organization-energizer-holdings","hck-taxonomy-industry-consumer-products","hck-taxonomy-country-united-states"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2017\/","yoast_head":"\n