BackSubdued trade takes toll on container shipping
Global import and exports have declined 0.1% and there hasn't been much of a recovery in the first six months of 2015
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World trade is slowing. A reason, of course, is a decline in prices as a result of the commodity meltdown. But volumes, too, are declining.
True, data from CPB Netherlands Bureau for Economic Policy Analysis (see chart 1) shows volumes (seasonally adjusted) increased 2% month-on-month in June. However, compared with January this year, volumes (global import and exports, both) have declined 0.1% and we haven’t really seen much of a recovery in the first six months of 2015. The situation in Emerging Asia is worse, with exports from the region having declined 2.8% so far this year.
In fact, signs of slowing trade are showing up in shipping indices as well. Containerized shipping is now sailing in stormy waters. The Shanghai (Export) Containerized Freight Index (SCFI), which reflects spot rates for container transport from Shanghai to the rest of the world, has risen 23% from its all-time low in July. Still, it is down one-third year-to-date to 675 on 21 August. In fact, the China Containerized Freight Index (CCFI), which is considered a broader measure as it tracks spot and contractual rates from China to the rest of the world, too, shows similar trends (see chart 2). CCFI has declined 20% so far this year to 844. Of course, one reason why most of the shipping indices, including the very popular Baltic Dry Index, have dropped substantially is the fact that too many vessels have hit the global market.
Having said that, considering the slowdown in Chinese exports, the decline in SCFI and CCFI shouldn’t come as a surprise as it suggests subdued demand in other parts of the world. The euro zone is a particular concern, say analysts, with demand for Chinese-made manufactured goods rather muted in the region. What’s more, the environment is likely to remain stormy in the days to come. “Global demand for seaborne container transportation is revised to an expected increase by 2-4% versus previously by 3-5%," according to a recent Maersk Group presentation.
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