World trade volumes have ticked-up by about 1% in the first quarter of 2024 following a flat 2023, according to trade data from the World Trade Organization. Merchandise trade (average of exports and imports) was up in Q1 2024 vs Q4 2023; trade was also up in by 1.4% in Q1 this year compared to Q1 last year. No matter how you cut it, that’s an increase.
“Most regions contributed positively to the upturn in trade volume, with Europe remaining a notable exception as it exports and imports continued to decline,” the WTO said.
The 1% upturn in trade in the first quarter is broadly consistent with WTO predictions and, the WTO adds, if world trade keeps up with the current rate of expansion then the trade volume for the whole year will be 2.7% higher than in 2023.
On an interesting note, the value of world merchant trade was down by about 2% even though volumes were up which “indicates that export and import prices were falling during this period,” the WTO says.
So, what’s driving the increase in trade?
Well, one is the current general strength of the US economy. According to the official U.S. Bureau of Economic Analysis, the U.S. economy has experienced a string of positive quarterly Real GDP numbers since at least the last quarter of 2022. It had a particularly strong Q3 2023 in the 5% region, 3.4% in Q4 2023 and 1.4% in Q1 2024.
“The increase in real GDP primarily reflected increases in consumer spending, residential fixed investment, nonresidential fixed investment, and state and local government spending that were partly offset by a decrease in private inventory investment. Imports increased… Compared to the fourth quarter, the deceleration in real GDP primarily reflected decelerations in consumer spending, exports, and state and local government spending, and a downturn in federal government spending. These movements were partly offset by an acceleration in residential fixed investment. Imports accelerated,” BEA commented.
Then there’s the tariff situation…
One theory currently doing the rounds relates to US tariffs. Media and lobby groups report that the Trump Administration put huge tariffs on trade and that the Biden Administration kept a goodly chunk of said tariffs in place. Then, in May 2024, the Biden Administration announced heaps more tariffs on Chinese trade particularly, worth about US$18 billion. Biden-tariffs kick-in about August time.
Meanwhile, Presidential Candidate Trump has proposed yet more tariff hikes if he is elected.
Concerned shippers are said to be front-loading their shipments to avoid tariffs / the prospects of tariffs, which does explain why there is some heat on the demand-side of the market.
That there is a surge of cargo volumes seems to be undeniable.
The Port of Long Beach (adjacent to Los Angeles and a major gateway port for the US) has reported its “busiest June on record,” driven by consumer spending, potential tariff increases, and labour contract negotiations. Long Beach handled just over 842,000 TEUs in June 2024, up a whopping 41.1% compared to the same month last year.
Looking over the fence to the adjacent Port of Los Angeles (Long Beach and Los Angeles literally share a fence), and Los Angeles is reporting that cargo volumes are up 14% at mid-year compared to the previous year. “The U.S. economy continues to be the primary driver of our cargo volume and I expect to see that continue in the months ahead.” Seroka added. “We have ample capacity on our docks to efficiently handle more goods as retailers and e-commerce outlets begin to move fall fashion, Halloween and year-end holiday items through the supply chain.”
Container shipping volumes
Shipping volumes are strong, with demand for ocean box freight hitting an “all-time record in May, with 15.9m (20-foot equivalent container) shipped globally,” reports analyst Emily Stausboll of cargo-related software provider Xeneta. The previous May record was 15.7m and was set in May 2021.
Volumes shipped in the first five months of this year were at 74.0 million TEU, up by about 5.2m TEU compared to the same period in 2023, with increased demand “across all global fronthaul trades in May”, Xeneta reported. A quick squint at the numbers shows that the volumes carried in the first five months of this year are ahead of all volumes in every year since 2019 … and that includes the booming cargo years of the COVID pandemic (2020 to 2022).
However, as Xeneta’s Stausboll notes, the increasing demand is not spread evenly across the ocean – there are different situations on different routes.
So, what’s the outlook, well, Xeneta argues that: “the situation can only be fully resolved by a large-scale return of ocean container ships to the Suez Canal. With no real prospect of that happening in the near future, shippers could be set for further pain in the coming months”.
Oceania
The armed attacks on shipping in the Red Sea have caused the current disruptions to world trade and this, along with equipment shortages, are causing congestion in south east Asian hubs, global shipping giant Maersk explains. Oceania is affected by this congestion.
“The delays in Southeast Asian hubs pose a risk of disruption at Australian ports due to vessel bunching on arrival, resulting in longer waiting times and other delays. The congestion and disruption have extended beyond the hubs and into Northeast Asia and Greater China ports, causing delays. Oceania exporters should factor in additional lead time as part of supply chain planning during this time,” Maersk explains in its July 2024 Asia Pacific Market Update.
