Q2 2024
MACROECONOMICS
2024 is taking the shape of a recovery year for global container volumes, as well as merchandise trade more generally.
The World Trade Organization (WTO) expects global merchandise trade to grow 2.6% in 2024, having fallen 1.2% in 2023. Furthermore, it projects 3.3% growth in 2025.
This means that, while last year trade fell despite global GDP growth, the WTO estimates that this year they will both grow at 2.6%, while in 2025 merchandise trade will rise by more than the 2.7% expected GDP growth.
Within the growth in global trade comes a split as geo-political blocs increase trading within themselves, while growth between blocs is falling. The WTO estimates that since the start of the Russia-Ukraine conflict, trade between non-aligned blocs has grown 4% slower than trade within aligned blocs.
Perhaps the clearest example of this is trade between China and the US. Since 2018 both US imports from and exports to China have grown at a slower pace than those from/to the rest of the world every year, except the pandemic affected 2020.
In 2023 total US imports (measured in value) fell 4.9%, driven by a drop in imports from China, which fell 20.4% (Source: US Census Bureau).
In comparison imports from the rest of the world fell by only 1.9%. Similarly, US exports to China fell 6.0% in 2023, double the drop in exports to the rest of the world which fell 3.0%.
The threat of 60% tariffs should the US elections go Trump’s way in November, may be pushing volumes up now and throughout the summer, either into the US or other strategic locations where a stockpile can be built up.
While Chinese exports to the US are down, its total exports in the first four months of the year, measured in value, are up 1.5% (Source: GACC). While exports to the ‘western world’ are down: Europe by 3.3%, Oceania by 4.7% and North America by 0.7%, exports elsewhere are growing.
Into Latin America they are up 7.7%. Growth into Sri Lanka and Vietnam are up 60% and 20% respectively.
Domestically, the Chinese economy grew 5.3% in Q1 according to its National Bureau of Statistics, though consumer spending, particularly on goods is still under its pre-pandemic level as Chinese consumers lack confidence and the property market continues to drag down.
The European Union’s economy posted its fastest quarter of growth since Q3 2022, up by 0.3% in Q1 2024. The pick-up comes largely from increased production of services, which reached its highest ever level in Q1, though the impact for container shipping is minimal when it comes to services. Retail trades also rose, up 2.0% in March from March 2024, but unlike production in services retail demand remains lower than its peaks in 2022.
Retail sales in the US are also continuing to grow, up 3.5% in the first four months of 2023.
However, there are large differences, sales in furniture shops were down 9.0% compared to the start of last year. In fact, April sales in these stores were the lowest in that month since 2020 – at the height of the pandemic.
A high volume product such as furniture is one of the key commodities for container shipping. At the other end of the scale online sales are up 10.1%, of which an important share comes from Chinese online retailers who bypass the long transit times offered by container shipping, and instead move goods by air – leading to tight capacity in that market.
For now, the reconnect between US consumer spending and container imports, which was missing for much of 2023 as inventories were drawn down, seems to have returned.
This may however not last long as shippers try to frontload goods, worried about further disruption from the Red Sea crisis and potential for new tariffs on goods coming from China (and at a lower level the rest of the world).
There is also the worry of disruption from union strikes in the US East and Gulf Coast ports as they renegotiate labor agreements.
This frontloading means that later in the year, or early next year, there will once again be a bigger difference between how US consumers are behaving and what US container imports look like.
