Port congestion causing global trade to stagnate

It is expected to stay pegged to last month's levels, Kiel Trade Indicator data shows

A container ship leaves a US port. Heavy congestion off Los Angeles and China's Ningbo-Zhoushan has reduced trade. AP Photo

Congestion at major container freight ports this month has disrupted shipping operations and is leading to stagnation in global trade, Kiel Trade Indicator data shows.

Overall global trade is expected to remain pegged to its August level, with an indicator value of zero. The same is expected for Germany’s trade, while overall EU exports are not expected to rise from the -0.1 per cent value recorded last month, Kiel Institute for the World Economy, which compiles the trade indicator, said on Tuesday.

For the US, the Kiel indicator shows slightly negative signs, with exports down by 0.5 per cent and imports 0.7 per cent lower.

The volume of world merchandise trade, which slumped by 5.3 per cent in 2020, has rebounded from the pandemic-induced collapse that bottomed out in the second quarter of last year. It is expected to grow by 8 per cent in 2021, according to World Trade Organisation estimates. However, bottlenecks in global shipping have increased costs and are threatening to reduce the pace of growth.

"The terminal closures in China are leaving their mark and dampening the exchange of goods,” said Vincent Stamer, head of Kiel Trade Indicator.

“There are no signs of a sustained easing of the situation, which clouds the outlook for international trade. This is likely to be felt via rising prices and continuing shortages of certain goods, including in the Christmas trade."

Congestion off Ningbo-Zhoushan and Los Angeles currently ties up about 3 per cent of global trade volumes in each of their main trade lanes.

Cargo volumes in the Red Sea – the main sea trade route between China and Europe – are 14 per cent lower than would be expected under normal circumstances.

"Christmas is not cancelled, but especially for products from China and Asia, missing deliveries or higher prices are to be expected," Mr Stamer said.

However, despite congestions issues, China seems to have found a way to overcome the closures of its terminals at the ports of Ningbo-Zhoushan and Yantian. Despite bottlenecks off the Chinese coast, more goods were shipped from these ports and Shenzhen in the past four weeks than in the four weeks before that.

For China's exports in September, the Kiel Trade Indicator signals an increase of 6.2 per cent and for imports an indicator value of 0.8 per cent.

The Kiel Trade Indicator estimates and analyses trade flows in terms of imports and exports for 75 countries worldwide, across the EU, and global trade as a whole.

It is based on the evaluation of ship movement data in real time. Through an algorithm programmed at the Kiel Institute, it uses artificial intelligence to translate the ship movements into nominal, seasonally adjusted growth figures compared with the previous months.