Journal of Commerce Economist Mario Moreno kept his below 4 percent growth outlook for this year’s westbound trans-Pacific container trade, as he doesn’t expect the reverse of European and U.S. fiscal imbalances in the first quarter to offset significant risks ahead for the trade lane. The trade is forecast to total 6.9 million TEUs this year, a rebound of 3.9 percent over prior year’s volumes, according to the June Container Shipping Outlook.
China’s slowing economy is one of the largest risks to trade in the westbound trans-Pacific, as Chinese gross domestic product growth for 2013 has been downgraded to 7.8 percent from 8.5 percent. “Despite fiscal stimulus and monetary easing, the Chinese economy is slowing more than anticipated, which will detract from future demand for U.S. goods throughout the region,” Moreno said in the report. In addition, China’s ‘Green Fence’ policy is likely to have an adverse impact on future U.S. exports of scrap goods, which include metals, plastic, and paper. Last year, China took 67 percent of the US scrap export market by volume, up from 53 percent 10 years earlier. “The policy, which was implemented in February, seeks to impose tougher restrictions on imports of recycled goods as a means to reducing overall pollution,” Moreno said. U.S. containerized exports to China are forecast to decelerate this year and advance by 3 percent after expanding by 7.7 percent in 2012, as reported in the Container Shipping Outlook.
With regard to agricultural exports, crop conditions in the U.S. have generally improved relative to the 2012 drought, but wet conditions in the southern states have delayed plantings of Asian-bound cotton crops. The U.S. Department of Agriculture is projecting a 19 percent decline in U.S. cotton production in 2013-2014.
The near-term outlook for foreign exchange rates is mixed. Trends in the currency markets will impact pricing and thereby exports of U.S. products to Asia. “In a welcome development for U.S. exporters, the Chinese yuan has been steadily appreciating since the fourth quarter of 2012, reaching record highs in May and June,” Moreno said. “The central bank has indicated an increase in the tightly controlled currency’s trading band is likely. This would be the second year in a row that the central bank has widened the floating band.”
Conversely, the Bank of Japan has greatly increased the amount of hard currency in circulation in an effort to stir the Japanese economy and combat deflation. “As a result, the Japanese yen has been declining sharply against the dollar, making U.S. exports considerably more expensive in that nation,” Moreno said. U.S. containerized exports to Japan are forecast to decline this year by 1.7 percent, following a 1 percent drop last year, according to the report.
Containerized exports from North America to the Far East were down 3.3 percent year-over-year in the first four months of 2013, according to data from Container Trades Statistics Ltd.