Drewry’s Moreno examines transpacific container shipping outlook

Container volumes from Asia to the United States will grow 6.8 percent in 2018 if there is not a trade war, according to a projection from Drewry Senior Economist Mario O. Moreno.    If there is not a trade war, Asia to United States container shipments will grow by 6.8 percent this year, while shipments from the U.S. to Asia will grow by 4.9 percent, according to a forecast presented by Drewry Senior Economist Mario O. Moreno.
   Moreno spoke Wednesday at the Port of Long Beach’s annual Pulse of the Ports Peak Season Forecast.
   In 2017, he said container volumes from Asia to the U.S. grew 3.5 percent, below his forecast of 6.9 percent last year at the same event.
   He said there were three main reasons for this, one of which was the dollar, which meant that U.S. import prices, excluding fuel, were up 0.9 percent, compared to a forecasted dip of 0.1 percent. “As the U.S. dollar gets weaker, it gets more difficult to import more goods at the same level as was acquired a year ago,” he said.
   Moreno also said that existing home sales were up only 1.7 percent in the face of rising mortgage rates, rising home prices and limited housing supply. Home sales are closely correlated to the container trade because furniture and home goods are major inbound commodities, he explained.
   Finally, automobile sales were disappointing, which was negative for imports of automobile parts, he said. WardsAuto statistics show car and truck sales last year totaled 17.1 million, down 1.9 percent, snapping a seven-year expansion. Light truck sales – which include minivans, SUVs and pickups – were actually up 4.4 percent to about 11.1 million, while car sales were down 11.5 percent to 6.1 million.
   Moreno noted his forecast was based purely on economic fundamentals, without figuring in the risk of a trade war.
   A 6.8 percent growth in Asia-U.S. container volumes this year would be stronger than the growth seen in any of the past five years.
   He suggested that China has more to lose from an all-out trade war with the U.S. than the U.S. That’s because the U.S. buys almost four times more goods from China than China buys from the U.S.
   Citing figures from the IHS Global Trade Atlas, Moreno said that in 2017, while China exported $505.6 billion in goods to the U.S., the U.S. exported only $130.3 billion in goods to China. He also noted that PIERS dats shows how there is a similar imbalance if one looks at the TEU numbers.
   “In my opinion, there is a good possibility of a U.S.-China trade war scenario in this year over the next few months, but I don’t see it as an all-out trade war scenario in which both companies use this tit for tat retaliation,” Moreno said. “I think if there is a trade war, it will be limited to certain products, certain industries.”
   However, he said if the furniture, apparel and footwear sectors are targeted, it could have a major impact as those three commodities alone account for 20 percent of U.S. containerized imports from China.
   A trade war with China would hurt U.S. West Coast ports most since between 2012 and 2016, 68 percent of Chinese container imports flowed through West Coast ports compared with 29 percent through East Coast ports and 3 percent through Gulf of Mexico ports, he explained.
   Looking at the backhaul trade to Asia, Moreno said U.S. exports to Asia last year slid 0.8 percent compared with his forecast of 1.3 percent of growth last year. He largely attributed this to the Chinese ban of foreign waste products, such as scrap metal, paperboard, and plastic, which he said accounts for a lot of U.S. exports to Asia.
   Going forward, Moreno believes exports will grow because the global economy will improve 3.2 percent and also because he believes the U.S. dollar will decline in value this year.