New Global Trade Report: Ship Me If You Can!
By News Team
Alliantz Research and Euler Hermes have published a report on global trade flow values that has thrown up some interesting results.
In the executive summary the authors write that the bullet points are:
- So far this year, global trade has bounced back faster and stronger than expected, especially in value terms: +8.6% q/q in Q1 2021 vs. +3.4% q/q in volume terms. This is driven by price and capacity pressures of manufacturing inputs and shipping.
- Despite peaking in 2021, these pressures are likely to continue in 2022 as lower tariff rates won’t make up for a slow normalization and structural changes in trade flows (e-commerce, green transition, etc.). We expect global trade to grow by +7.7% in volume terms in 2021 (vs. -8.0% in 2020) and by a much higher rate of +15.9% in value terms (vs. -9.9% in 2020); and by +6.2% in volume terms and +8.4% in value terms in 2022.
- Input restocking explains c.50% of the rise in trade flow value this year, as the global race for inputs is supporting trade volumes and pushing prices up. The race leads to the just-in-case model of inventories management being more widely adopted, which can lead to a form of micro speculation in which companies rush to acquire inputs, to protect against further price increases. Such a strategy adds further pressure to the ongoing global supply-demand imbalance.
- Shipping constraints explain another c.35% of the rise in trade flow value this year, as vessels are currently being used at almost full capacity and importers are willing to pay more for their orders to be transported. The shipping industry is unlikely to normalize in the short-term (2021-2022).
- Which countries and sectors are most vulnerable? Europe (Germany in particular) is overall lagging in terms of input stock, while the US and some economies in Asia seem to be hoarding inputs. The transportation sector, along with textiles & apparel and computer & electronics, are currently seeing declining inventories from already low pre-crisis levels.
More details and the full report can be found at https://www.allianz.com/en/economic_research.html
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