What prompted a headline 20 percent drop in the U.S. to China trade last year?
One of the standouts from the Agility Emerging Markets Logistics Index 2014 released last month was the judgment that the U.S. to China ocean lane was one of 2013’s biggest losers — declining 20 percent year-on-year — with the slowing Chinese economy initially named as the reason for the downturn.
JOC was somewhat taken aback by the size of the drop given that Mario Moreno, our-in-house economist, predicts 6 to 7 percent year-on-year growth in US containerized exports to China when full year figures for 2013 are finalized. Indeed, US exports across a number of categories including autos were up substantially last year, and exports of U.S.-made vehicles to China have increased six-fold since 2009, making autos the highest earning manufacturing sector in the overseas market, according to the U.S. Commerce Department.
U.S exports also rose to their highest level on record in November, while a drop in imports narrowed the trade gap to its smallest level since late 2009. Adding even more smoke to this particular statistical fire was a Wall Street Journal report in early January stating that U.S. exports to China from January through November rose 8.7 percent compared with the same period a year earlier.
So why the discrepancy? Well, one factor is that the trade lane methodology used by Transport Intelligence, which produces the Agility Emerging Markets Logistics Index, does not include oil related products. And U.S exports of diesel, gasoline and jet fuel have been rising as US petrol demand has stalled and crude output has surged.
John Manners-Bell, Chief Executive of Ti, told the JOC that data used in the index was sourced from the USA Trade Online website, which gets its data from the U.S. Census Bureau. “The measure used is ‘Vessel SWT’ which is the shipping weight of trade going through vessel ports — seaborne trade — expressed in kilograms’,” he said.
While this takes in all sea freight including containers, it does not cover oil-related exports. “We did this to get a figure closer to what might be termed ‘manufactured goods,’ but it includes a vast array of other goods,” he added.
Another factor is that Ti, like all analysts producing full-year analysis for 2013 so early in 2014, was forced by necessity to estimate fourth quarter figures based on trends apparent in previous quarters. Manners-Bell said there could be “a substantial upturn in the last quarter that could affect these projections”.
Moreno, for his part, offered a different take on the matter. “One explanation to this is that exports to China are mostly bulk cargo, around 60 percent, while the other 40 percent of all exports to China are containerized,” he said. “Although US containerized exports to China through the third quarter are holding up at +5 percent year-on-year, non-containerized exports to China over the same period of time are down by 8 percent year-on-year.”
“Non-containerized exports to China are down mainly because demand for top-ranked soybeans dropped markedly last year, mostly because of poor production over the summer, as drought suppressed Midwestern soybean yields — soybean exports in 2012 accounted for 32% of all exports to China by metric ton volume,” he said.
Moreno expects China’s demand for soybeans to improve significantly this year, mainly because South American exporters are facing logistic challenges to deliver soybeans, pushing Chinese importers to purchase more soybeans from the U.S. in recent months. “U.S. soybean exports to China may set a record in the 2013-2014 marketing year, as long as weather is benign through the growing season of course,” he added.
The exact breakdown of U.S. exports to China will not become clearer until the official trade figures are released later this quarter. Although even then there are sure to be some discrepancies, such is the nature of the numbers game.
As Mark Twain once bluntly cautioned, statistics and scientific truth are not always easy bedfellows.
Contact Mike King at email@example.com.