MARITIME & TRADE Big hitters driving global trade in 2016 and beyond U.S. Containerized Imports start the year with a bang
U.S. containerized imports picked up the pace in the first quarter, expanding year-overyear for the 18th consecutive quarter. Trade in the first quarter of 2016 was strong, with volumes adding 7.5 percent year-over-year according to IHS PIERS, almost 3 percentage points above forecast, certainly not in line with first-quarter economic conditions. Among individual markets, trade from Northeast Asia drove the bulk of the overall increase during Q1, with shipments adding 3.41 percentage points to overall import growth. Other trans-pacific markets did not perform nearly as well. Southeast Asia added 1.80 percentage points, while the Indian subcontinent and Oceania added only 0.32 and 0.09 percentage points, respectively to Q1 growth. In the westbound trans-atlantic trade, the Mediterranean region made the biggest contribution to overall Q1 growth, 0.84 percentage points, while northern Europe added 0.53 percentage points to growth. Middle East and African contribution to growth was very small. Northbound, the Q1 results were similarly positive. Shipments from the east coast and west coast of South America added 0.24 and 0.28 percentage points to overall Q1 growth, respectively, while shipments from Central America added 0.23 percentage points to growth. Shipments from the Caribbean, however, subtracted 0.01 percentage points from growth. Top-ranked furniture increased in the first quarter by 10.6 percent year-over-year as demand for homes in the U.S. continued on the back of low mortgage rates and an improved labor market. Existing home sales rose 1.9 percent in the quarter, a moderate growth pace partly because of tight supply. Containerized furniture is mostly shipped from Asia. Growth of U.S. containerized imports of auto parts picked up the pace in the first quarter of the year and expanded 10.5 percent, partly linked to an easy year-over-year comparison. Demand for containerized auto parts from major Asian suppliers Japan and Korea fell last year, possibly linked to offshoring of production, and greater U.S. domestic production. U.S. production of auto parts has reached a new high according to Fed data. The industrial production index of auto parts increased in Q4 for the 12th consecutive quarter as demand for motor vehicles continued. The index registered a reading of 122.5 in Q4, up 22.5 percent from 2012, and marking the highest reading ever. Demand for containerized footwear continues to be weak, up only 0.6 percent in the quarter, while growth in women s and infant wear was flat. 2
U.S. Containerized Exports Rise for First Time after Falling for 6 Successive Quarters U.S. containerized exports rose in the first quarter of the year for the first time after declining for 6 successive quarters. Nevertheless, first-quarter growth of 3.2 percent is far from remarkable as it is compared to a very weak base of 1Q2015. Northeast Asia contributed most to the trade during the first quarter, adding approximately 2.06 percentage points to growth. Shipments from China are now up for 4 consecutive quarters, year-over-year; however, there s more trouble ahead for the trade as China s manufacturing sector is in decline. Another region that significantly contributed to export growth during Q1 was the Indian Subcontinent. This region contributed 1.46 percentage points to export growth, its highest contribution since 2009. Latest official data pegged India s economic growth at 7.3 percent year on year (y/y) during the October December 2015 quarter, driven in part by a strong recovery in manufacturing output. Thus, it is no surprise to us to see increased shipments of paper & paperboard and scrap metals during the fourth quarter of 2015 and the first quarter of this year. Meanwhile, Southeast Asia added only 0.16 percentage points to Q1 growth, after two successive quarters of subtraction. anaemic orders. Outbound shipments of No. 2 ranked pet and animal feeds jumped 21.8 percent in the quarter, on improved demand from East Asia and Northern Europe. U.S. poultry exports increased 4.8 percent in the quarter. Market conditions have been very tough last year, not only because of the import bans on U.S. poultry in major markets but also the U.S. dollar strength. Looking forward, a modest rebound is expected for 2016, partly thanks to an easy yearover-year comparison base. Moreover, the dollar strength has eased, and top buyer Mexico recently lifted its ban for U.S. poultry products from all U.S. states except the state of Indiana. Also, South Africa ended its import ban on U.S. poultry early this year. In the Trans-Atlantic, trade to Northern Europe grew for the first time in the last 6 quarters driven by solid demand from Belgium and the Netherlands, and added 0.85 percentage points to overall export growth during the quarter. The Dutch economy has expanded for seven consecutive quarters, driven by expansion in consumption, exports and investment. Trade to the Mediterranean region declined for the 7th consecutive quarter on the back of anaemic demand and weak euro, while Africa added 0.31 percentage points to growth, its highest contribution since the third quarter of 2012. Within the Western Hemisphere, southbound trade dropped 5.4 percent, the third consecutive quarterly decline, as a 5.6 percent gain in trade to Central America was overwhelmed by a 4.1 percent loss in shipments to the Caribbean, and a 21.6 percent decline to the east coast of South America, and a 6.5 percent decline to the west coast of South America. Trade to Central America has expanded for 7 consecutive quarters with Guatemala and Honduras leading the gains, a remarkable performance given the overall sluggish global economic conditions. No other regional export market has been able to display such resilience. Trade to the East Coast and West Coast South America, however, is badly underperforming. East Coast South America subtracted most from export growth during Q1, almost 0.7 percentage points as Brazil and Venezuela are coping with severe economic conditions. Meanwhile, West Coast South America subtracted 0.25 percentage points from Q1 growth, as demand from commodity dependent economies of Chile and Peru enervated. With a 14.0 percent share of all shipments by volume, paper and paperboard, including wastepaper shipments, has a large influence on overall trade. U.S. containerized exports of this commodity grew 15.5 percent in the first quarter according to IHS PIERS on the back of an easy year-over-year comparison. The global manufacturing sector continues to struggle with Exports of soybeans declined 29.3 percent in the quarter, with Southeast Asia acting as the main drag on the trade. El Nino event caused mixed regional precipitation, but was more damaging in Brazil this season. Overly wet weather has led to rust fungus outbreaks in southern Brazil and overly dry weather is drawing concerns on pod filling in the northern and central parts of the country. The U.S. and Brazil are the largest exporters of soybeans, together taking 80 percent of the world seaborne export market by metric ton volume. It seems both countries alternate the top stop, with Brazil being the largest exporter this part year, and the US the largest exporter in the prior year. Over the years, Brazil has made major investments in its agricultural sector and gradually pursued policies to boost production. U.S. exporters certainly face strong competition from Brazil, more so now when the dollar is quite strong. Author: Mario O. Moreno, Senior Economist Global Trade 3
Top 5 Exporters Responsible for 50 Percent of Total Global Container Trade in 2015 We estimate that world containerized trade increased 1.3 percent to 129.5-million TEUs in 2015, and we forecast that 2016 will bring a further increase of 3.0 percent to 133.3-million TEUs. We project the global growth rate will be 4.6-5.1 percent in the medium term. From a historical point of view, this is a major change compared with the doubledigit growth rates the industry became accustomed to, but we have to accept that globalization appears to have worked its way through the global sourcing system and that we are now back to depending on straightforward demand. Even with the lower growth rates, global container trade will be 12.3-million TEUs higher in 2017 than in 2014, at 140.1-million TEUs, helping explain the need for increased shipping tonnage over the longer term. The top-five exporters were responsible for about 50 percent of total global container trade in 2015, with China continuing to expand, accounting for 28 percent. China exports three times the volume of the United States; still, the United States remains a major global exporter, second only to China and significantly larger in size than the next three export origins. The long-term average growth rates for Japan are half those of the top-three exporters. The World Trade Service forecast for Chinese exports over the long run (2010-30) suggests an average growth rate of 4.3 percent, compared to the United States at 3.7 percent and South Korea at 4.4 percent. The share of world container trade by export region remains relatively stable between the top-five countries and the rest of the world. Many major Far East origin and destination markets performed worse in 2015 than in 2014. Nevertheless, they remain among the largest in volume, with intra-asia dominating all other trade lanes. The strongest growth in terms of percentage increases by major trade route in 2015 originated in the America, Australia and New Zealand, as well as Northern Europe. Indian Subcontinent/Middle East growth rates are also expected to be remarkably fast this year. Frontrunners in Commodities Five commodities plastics in primary forms and synthetic rubber; furniture; chemical products (not else classified); parts of motor vehicles; and non-refractory clay and ceramic products accounted for 18.9 percent of global containerized trade measured in TEUs in 2015. We expect the share of these commodities to increase during the forecast period, reaching 21.4 percent by 2030. Saudi Arabia is the main origin of containerized exports of plastics in primary forms and synthetic rubber, while China is the leading exporter of the other four commodities. In fact, China exports more furniture and non-refractory clay and ceramic products than all other countries combined. Plastics in primary forms and synthetic rubber accounted for 6.9 percent of the world s containerized trade in 2015, exceeding the share of any other commodity. By 2030, this share is expected to rise to 8.2 percent. The share of furniture is likely to increase slightly less significantly, from 3.5 percent to 4.7 percent. The contribution of chemical products (not elsewhere classified) will also expand, from 3.1 percent to 4.1 percent. By contrast, during the same period, the shares of parts of motor vehicles and non-refractory clay and ceramic products will both decline, from 2.7 percent to 2.2 percent. Author: Andrei Roudoi, Senior Manager, Economics, Product Management & Elizabeth Rouhani, Principal Economist, Product Management 4
U.S. DDGS Exports Underperform in Early 2016 U.S. exports of DDGS (distiller s dried grains and soluble) have soared in recent years from 1 million tons in 2006 to more than 12 million tons in 2015, according to data from IHS Global Trade Atlas. DDGS are produced from the fuel ethanol industry, and are widely used as a feed for livestock for its rich concentration of energy. China has driven the bulk of the growth in the last seven years, taking 51 percent of the export market in 2015, triggered by the need to feed its large and growing population. Mexico (13 percent) was the second-largest importer, while Vietnam (5 percent), Korea (5 percent), and Canada (4 percent) round out the Top 5 foreign buyers of U.S. DDGS. From January through April, however, the export performance of DDGS was disappointing; the trade volume was down 1.9 percent, with China the main source of weakness. What happened to Chinese demand? Year-to-date through April, China demand for U.S. DDGS fell in volume by half, subtracting a substantial 17.3 percentage points from export growth. The disappointing performance is linked to an investigation by the Chinese administration into potential dumping and subsidizing of U.S. DDGS imports. U.S. grains industry organizations and traders read this action as a move by China to reduce imports of corn and alternatives as they are sitting on substantial stockpiles of corn. Notwithstanding, there were solid gains in most markets, with Korea and Vietnam leading the gains, and adding 2.5 and 2.4 percentage points to year-to-date growth. Demand from Vietnam has been remarkable during the past few years, growing at annual rate of 15 percent between 2013 and 2015. Year-to-date through April, U.S. exports of DDGS to Vietnam were up an impressive 45.5 percent, totalling 257,000 metric tons. A major demand driver for Vietnam of late has been the pork shortage in China. Piglet survival rates have been very poor for China, prompting increased import demand worldwide, and benefiting Vietnam. China imports of frozen pork from Vietnam are expected to grow 8.0 percent in volume this year, according to IHS World Trade Service. Pork is a major source of protein for Vietnam, with its people consuming 30 kilograms per capita, higher than the 22.2 kilograms per capita in the U.S., according to estimates from the Organization for Economic Cooperation and Development. China s worldwide imports of swine (pork) meat, fresh or frozen, were up 120.0 percent year-to-date. Author: Mario O. Moreno, Senior Economist Global Trade For more information www.ihs.com/maritime_trade customer care americas T +1 800 447 2273 +1 303 858-6187 (Outside US/Canada) customer care europe, middle east, africa T +44 1344 238 300 customer care asia pacific T +604 291 3600 E CustomerCare@ihsmarkit.com About IHS Markit IHS Markit (Nasdaq: INFO) is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. IHS Markit has more than 50,000 key business and government customers, including 85 percent of the Fortune Global 500 and the world s leading financial institutions. Headquartered in London, IHS Markit is committed to sustainable, profitable growth. Copyright 2016 IHS Markit. All Rights Reserved 2738-CU-0916