Business as usual or a shift in global trade?

In recent months there has been growing decoupling rhetoric between Chinese and Western economies. The Biden administration has vowed to create ‘China- Free’ supply chains and blacklisted dozens of Chinese companies. There has also been discussion, of which we have contributed to in our market updates, of a manufacturing shift away from China to other hubs such as Vietnam and India.

But pushing rhetoric aside, the numbers reveal a paradox: how can China, often characterised in the media as a US economic adversary, also be their largest trading partner? A quantitative truth flying in the face of decoupling discourse, a truth which only seems to grow year on year. 

2022 was a record breaking year for U.S - China bilateral trade with combined imports and exports reaching $690 billion. A $31 billion increase in imports from China compared with 2021. Trade is not a 1 way street either, US exports to China also grew by $2.4 billion. These numbers are also reflected in the sentiments of US business leaders, with a poll of 300 companies conducted by the American Chamber of Commerce in Shanghai revealing that 70% of American manufacturers had no plans to move production out of China. This growth is not confined to the US either, trade volumes between China and the EU were up 23% from 2021 levels, reaching $910.6 billion. 

However some analysts have been quick to point out that a shift is happening, slowly but gradually. US imports from Vietnam have increased from 10% to 16% between 2018 to 2021 and imports from Mexico have also been on the rise from $293.5 billion in 2016 to more than $384 billion in 2021.

As we move through 2023, with demand remaining low and inventory levels high, what can we expect from the year ahead? Will 2023 be yet another record breaking year for trade between China and the west? Or will market and geopolitical pressures force businesses to adapt, facilitating shifts in the order of global supply chains?

Asia 

China 

Ocean

Rates have continued to fall from Asia to Europe and the USA amidst continuing weak demand.

• Roughly 30% of capacity on the Transpacific trade lane has been blanked this week as carriers seek to manage rate decline. 
• Capacity from Asia to Europe is tighter due to blank sailings however it is yet to stem rate decline.

Chinese manufacturing activity during February  has accelerated at its fastest pace in more than 10 years.

• This has been attributed to a lifting of Covid restrictions and the returning workforce following Chinese New Year.
• The manufacturing Purchasing Managers’ Index (PMI) shot up to 52.6 from 50.1. 
• The PMI is an index of the prevailing direction of economic trends in the manufacturing and service sectors.

Yard utilisation and congestion across Chinese ports remains normal this week.

• Although the number of empty containers at ports is on the rise.

Air

Central China to USA and Europe 

From SHA to Europe and the USA, rates have increased this week. 

• This is in part due to factories having fully resumed production, therefore more cargo is ready to ship. 
• We recommend booking as early as possible to secure space. 

From NGB to Europe and the USA, rates have increased this week. 

North China to USA and Europe 

From TSN to Europe and the USA,  rates have increased this week, especially to the USA.

• For cargo to Europe we recommend booking at least 3-4 days in advance due to limited space.
• For cargo to the USA we recommend booking at least 6-47 days in advance due to limited space.
• Air China, Lufthansa and Singapore Airlines can provide spot rates for dense cargo on their passenger flights from TSN to Europe.  
• Japan Airlines, All Nippon and Cathay Pacific can provide spot rates for dense cargo on passenger flights from TSN to the USA. 
• Korean Air and Asiana Airlines can provide freighter flights with earlier ETDs on both routes. 

From PEK to Europe and the USA, rates have increased this week, especially to the USA.

• For cargo to Europe we recommend booking at least 3-4 days in advance due to limited space.
• For cargo to the USA we recommend booking at least 6-47 days in advance due to limited space.
• There is still reduced service available to the USA as some carriers are taking on less volume than normal or have cancelled and rescheduled flights. 
• We advise checking space and rates on a case-by-case basis. 

From TAO to Europe and the USA, rates have has increased this week.

From CKG to Europe, rates have remained stable but to the USA rates have seen a slight rise.

• Plenty of space is available between CKG and Europe.

South China to USA and Europe 

From  CAN to Europe and the USA, rates have increased this week.

• Space has become tight forcing rates higher.
• Rates and space availability should be checked on a case by case basis.

From SZX to Europe and the USA, rates  have increased this week.

• Space has become tight forcing rates higher.

North America

USA 

Ocean

Ongoing labour discussions between US West Coast terminal operators and dockers give rise to fears of permanent volume loss. 

• The negotiations are between the International Longshoremen & Warehouse Union (ILWU) and 70 employers on the US west coast, represented by the Pacific Maritime Association.
• Negotiations had recently progressed with deals being reached on key issues such as health care, however outstanding issues regarding automation and work allocation remain. 
• Stakeholders fear the uncertainty generated by the ongoing unresolved negotiations could result in a permanent loss in cargo, with shippers opting for East Coast ports instead. 

The overall U.S. trade deficit for 2022 reached nearly  $1 trillion, a 12.2 percent increase in 2021.

•  Americans purchased large volumes of foreign machinery, medicines, industrial supplies and car parts.

Europe

Benelux

Ocean

Geopolitical issues are impacting the Port of Rotterdam. 

• Sanctions imposed on products and resources from Russia have seen a significant decline in the port's throughput. 
• In 2021 roughly 15% of the port's throughput was Russian oriented, however following sanctions this has now fallen to 9%. 
• A large amount of this decline was crude oil and oil products which previously came through the port of Rotterdam. 

The Port of Antwerp is aiming to be the world's most sustainable port.

• Port authorities have set a goal of net zero emissions by 2050, hoping to use wind power, alternative fuels and digital technology to slash their C02 emissions. 
• The port currently contributes 4.5% to Belgian GDP while generating close to 10% of national emissions. 

UK 

Ocean

Windsor Framework signals an end to the Irish Sea border. 

• The deal announced by UK prime minister Rishi Sunak and president of the European Commission Ursula von der Leyen is aimed at reducing trade restrictions between Northern Ireland and Great Britain.
• A new green lane will be created for traders between Northern Ireland and Great Britain allowing new freedoms for medicines, chilled meats and pets to move over the Irish Sea.
• The deal gives the UK government an “emergency brake” on new EU laws applied in Northern Ireland if politicians in the province object to them. However this was expressed as an emergency mechanism only and the European court of justice would have the final say on single market issues.
• The deal still needs to be ratified by the EU and UK government bodies before it comes into effect but if it is approved the Northern Ireland protocol will fall away. 

Road

UK Haulage firms are increasingly looking to electric energy alternatives for their fleet of HGV and LGV. 

• However  these vehicles currently only make up a fraction of electric vehicle purchases in the UK (0.3%).
•  It is hoped that with infrastructure improvements, allowing long haul drivers to charge where necessary, as well as improvements in battery technology that electric HGV and LGV vehicles will become a more feasible and realistic alternative.