Be the first to recover! "China Factor" Boosts Global Shipping Market
Clarkson's research shows: The latest data released by China Customs shows that China's foreign trade imports totaled US$176.3 billion in August 2020, a year-on-year decline narrowed to 2.1%; foreign trade exports reached US$235.3 billion, a year-on-year increase of 9.5%, further Recovered from the negative impact of the new crown epidemic at the beginning of the year. For the shipping market, it is more intuitive to analyze China's foreign trade data in tons. As a major global trading country, China's seaborne imports accounted for 22% of global imports in 2019, and exports accounted for 5% of global exports. Therefore, changes in China's maritime trade volume have a significant impact on the global shipping market's capacity demand.
China's imports: steady growth
Under effective epidemic prevention and control, orderly resumption of work and production, and strong economic stimulus policies, China’s seaborne trade imports continued to recover. In July, seaborne imports amounted to 270 million tons, an increase of 18% year-on-year, of which dry bulk and crude oil Import performance is very strong. China's iron ore imports increased to 110 million tons in July, the highest level in a single month in history. The reasons for the steady growth in iron ore imports since the beginning of the year include (under the stimulus policy led by infrastructure) crude steel production has increased the demand for iron ore; the shipment volume of Australia and Pakistan has improved, and the proportion of shipments to China is significantly higher than in previous years; other weak demand Countries transfer iron ore to China. China's seaborne grain imports in July increased 33% year-on-year to 12.8 million tons, of which soybean imports increased by 17% year-on-year, mainly due to Brazil's record high grain yield (imported Brazilian soybeans increased by 27% year-on-year). In addition, the combination of low oil prices and high refinery operating rates has driven China's seaborne crude oil imports to continue to rise, which increased 28% year-on-year to 47.12 million tons in July. Of course, there are also some commodity imports that are still under pressure. For example, LPG imports fell by 22% year-on-year in July, partly due to the weak domestic demand and the increase in domestic production due to the epidemic.
China's exports: the decline narrowed
In contrast, the export performance is relatively weak. The overseas demand and the transportation supply chain that have yet to recover have restrained China's seaborne export volume. In July 2020, China's seaborne exports amounted to 49.12 million tons, down 6% year-on-year. Among them, exports of refined oil products fell sharply, falling 43% year-on-year in July (although high domestic inventories may boost exports in the later period). Steel exports in July also continued to decline year-on-year, with a decline of 25%. In contrast, China's export volume of containerized goods is basically the same as the same period last year, mainly due to the gradual recovery of overseas demand and the traditional peak season (before Christmas).
Future Outlook: Risk Management
With the support of a series of policies, China’s economic and trade “restart” activities have proceeded smoothly. From January to July 2020, seaborne imports increased by 11% year-on-year, and the decline in exports also narrowed to 6%. The continued recovery of China's foreign trade will undoubtedly bring more confidence to the shipping market. In addition, we may also capture the potential dynamic changes in global maritime trade in the post-epidemic period from the process of China's economic recovery. For the prospects of China's maritime trade in the second half of this year and 2021, the risk of the new crown epidemic still exists. Although European and American countries have gradually liberalized their blockade policies, it will take time for overseas demand and international transportation channels to return to normal levels. The high inventory of some commodities may also suppress future Chinese import demand. Sino-US trade relations are still undergoing dynamic changes. Recently, China and the United States have reiterated their commitment to the first phase of the trade agreement, but the potential impact of this practice on trade is still unknown. For more analysis of China's economy and maritime trade, please refer to Clarksons Research's monthly magazine "China Intelligence Monthly".