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Home » WTO Sees Early Signs of a Potential Trade Rebound

WTO Sees Early Signs of a Potential Trade Rebound

by Joshua
March 3, 2023
in Featured, News

The World Trade Organization’s research arm has confirmed the trend that container lines and shippers have been seeing on major trade lanes since the end of last year: the growth in world merchandise trade slowed in the fourth quarter, and the trend appears to be sticking for now – but there are some early signs of a possible turnaround.

The WTO’s goods trade “barometer,” an index of merchandise trade activity, fell from an above-average 102 points in July 2022 to a below-average 92 points in March 2023. It is the latest in a series of gyrations induced by the COVID-19 pandemic, which caused trade to plummet in early 2020, then soar to unprecedented levels in 2021-22.

The slowdown in containerized trade is clearly evident at major trade gateways like the twin ports of Los Angeles / Long Beach, which were heavily congested in early 2022 but are operating as normal today. Container lines are having to adjust to a market where the shipper has more choices and leverage, and freight rates have fallen back towards the historical average. WTO’s container port throughput index reflects this reality, and its current value stands at 89, below the on-trend baseline of 100 – nearly as low as it was in mid-2020, when the pandemic dragged down economic activity.

There are signs of a possible revival, though. The container throughput at Chinese ports is picking up, according to WTO, and the volume of new export orders from purchasing managers’ indices are on the rise as well. “The export orders index (97.4) remains below trend but is rising, hinting at a possible upturn in the near future,” WTO’s team found.

Other analysts see signs of a turnaround in a more obscure data set: the location of idle container ships. As demand for container shipping on the core east-west trade lanes has fallen, an increasing percentage of the world’s fleet is off duty and waiting for better times. Owners often use the opportunity of a downturn to drydock or make repairs, or – for the oldest and least profitable ships – to sell tonnage for scrap. But disused container ships spend most of their time at anchor, and the location of the anchorage may yield clues. About four percent of the world’s cellular capacity is currently idled, according to Drewry, and a large share of it is waiting just off China.

“There are expectations that a potential rebound is coming,” said Frank Andersen, head of Asia at maritime data provider Shipfix, speaking to Bloomberg. “Maybe these ships will slowly get activated, although we could see that taking a few more months.”

 

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