All major trade lanes out of Asia are expected to show growth to various degrees next year, according to an expert speaking at the TPM Asia conference.
Containerized shipping between Asia and the US, which is showing an upward trend overall, has been volatile over the past few months.
“The Asia-US trade stalled after remarkable growth in the first quarter of this year,” said Mario Moreno, senior economist at IHS Maritime & Trade. “The first thing that comes to mind is excessive accumulation of inventory. In the latter part of 2015, most businesses in the US were very optimistic about the US economy for 2016. They had a very positive view of retail sales and consumer spending, but unfortunately sales did not meet expectations.”
The main driver of growth going forward is the US housing market, according to Moreno.
“The housing market continues to boost gains in the Asia-US trade,” he said. “Both home sales and home construction exert a tremendous influence on the demand for containerized goods from Asia.”
According to the United States Trade Representative, furniture and bedding continued to be the top containerized import from Asia to the US.
“By itself, it accounts for 13% of the total Asia-US trade,” said Moreno. “We find that there is a positive correlation between US home sales and US furniture TEU imports. The strength of this correlation was measured at 60% between 2007 and the first half of 2016.”
The Asia-US trade will end 2016 with a growth of about 4.4%, with China leading the gains for the seventh year in a row and accounting for half of that growth, according to Moreno, who noted that China’s exports to the US have been weak in certain low-value, labour-intensive commodities such as footwear but that high-value goods such as furniture have increased.
For 2017, Moreno is anticipating growth of about 6.2%, amounting to a total of 15.9 million TEUs. This is based on improving economic conditions in the US, such as the GDP rising from 1.7% in 2016 to 2.4% in 2017 and growth in consumer spending. In particular, spending on durables, which includes furniture, is expected to grow by 6.4% in 2017 after 5.3% in 2016.
“Beyond 2017, the Asia-US trade is forecast to pick up the pace in the next five years,” he said. “We’re looking at a growth of about 5-5.5% per year over the next five years. But it is not expected to go to pre-recession levels.”
The Asia-Europe trade, which has been struggling for most of 2015, is now seeing a bit of a recovery.
“From January to June 2016, the trade was only up 1.3%,” said Moreno. “The demand from the Eurozone economies was very weak throughout. Russia’s economy has begun to stabilize and we’re seeing a bit of a rebound in demand for containerized goods from Asia.”
Looking into the types of commodities involved, chemicals are leading the gains in the Asia-Europe trade for the first half of 2016, whereas textiles and apparel are leading the losses.
For 2017, Moreno expects a growth of about 3.4% to a total of 13.5 million TEUs for the trade, after growing by about 1.6% in 2016. This would be a new peak year for the Asia-Europe trade.
“The Eurozone economies will continue to grow modestly, but the Euro will likely be weak for the rest of 2016 and in 2017, which could be a boost for the Eurozone manufacturing sector,” he said. “The weakened Russian currency has boosted the competitiveness of Russian manufacturing, which translates into higher demand for raw materials, so we expect Russia to contribute once again to growth in the Asia-Europe trade in 2017.”
Looking beyond 2017, containerized trade between Asia and Europe is estimated by Moreno to grow by about 4% a year for the next five years, a substantial improvement compared to just 1% a year over the past five years.
As for the Asia-South America trade, IHS is estimating a drop by some 2.6% for 2016 but a slight rebound next year.
“For 2017, the trade will stabilize and will post modest growth of about 0.7%,” Moreno said. “The source of weakness in the trade is Brazil, which accounts for approximately 30% of the total Asia-South America trade.”
Venezuela is in an even worse situation than Brazil, with the International Monetary Fund estimating the country to have the world’s lowest GDP growth rate at -8.0%.
“We don’t expect much from Venezuela this year and the next,” said Moreno. “However, one country which we’re expecting to boost the gains in the Asia-South America trade is Peru. The economy is characterized by strong growth fundamentals, coupled with price and exchange rate stability. Peru’s import growth will be supported by a moderately increased value of its currency and also be favourable oil prices.”
Lastly, the Asia-Africa trade is expected to post a growth of around 4.3% for 2017, after a decrease of 1.8% in 2016. The two main drivers, according to IHS, are going to be Algeria and Mozambique.
“Mozambique is very interesting because the demand for containerized goods from Asia has been increasing at a remarkable pace over the last 10 years,” said Moreno. “Mozambique’s economic performance is expected to outshine regional peers over the long term. There are strong inflows of foreign direct investment and there is a fast-paced public-sector infrastructural development programme going on, which in our view is going to drive demand for containerized goods from Asia going forward.”
By Jeffrey Lee
Asia Cargo News | Shenzhen