Today’s Pickup: growth in global trade signaling slowdown

Good day,

Even before a round of U.S. tariffs levied on China comes into force Friday, there are signs that global trade is already cooling, according to the Wall Street Journal.

Business surveys published this week show that global export growth, strong in 2017, has slowed to a virtual crawl—helping to drive sharp stock-market falls in big exporting nations like South Korea and Japan.

The data suggest that the synchronized world-wide growth that sustained global markets and company earnings for much of last year is starting to run on empty. The slowdown is likely to have a greater impact on trade than the developing conflict among the U.S., China and other major economies, analysts and investors say.

“There is a huge correlation between the performance of Asian exports and Asian earnings. You can extend that analysis from global trade to global earnings,” said Tai Hui, chief markets strategist for Asia at J.P. Morgan Asset Management. Companies in sectors like consumer electronics are already suffering, he added.

Did you know?

FloraHolland, just outside of Amsterdam, is the largest flower exchange and marketplace in the world. The exchange handles over 12 billion flowers a year, generating a notional trading value of 4.7B euros.

Quotable:

“2018 is shaping up to be the highest freight volume market in over a decade according to the Cass Freight Index (CFIS.USA) on SONAR. The index is currently showing 1.31, up from 1.17 a year ago. This is a great sign for carriers moving into the second half of 2018, as conditions should remain tight as the economy continues the momentum going into the third and fourth quarters.”

—Sultan of SONAR

In other news:

Here’s where China stands as hour of U.S. tariffs approaches

With further tit-for-tat levies already threatened, this week could mark the start of a new and damaging phase. (Bloomberg)

Trump to OPEC: ‘Reduce pricing now!’

U.S. President Donald Trump again accused the Organization of the Petroleum Exporting Countries of driving gasoline prices higher on Wednesday and urged the oil producer group to do more. (Reuters)

Diesel average heads up for first time in five weeks

The average price per gallon of diesel gasoline headed up 2 cents to $3.236 per gallon, the Department of Energy’s Energy Information Administration (EIA) reported this week. (SupplyChain247)

Air freight volumes look to have resumed a modest uptrend

IATA’s May air freight data notes a “modest uptrend,” but it remains relatively pessimistic on the whole, as it sees the market weakening. (The Loadstar) 

Why made in China 2025 will succeed, despite Trump

The rush toward automation in China’s manufacturing center suggests Made in China 2025 will succeed, in part because the effort is bigger than Beijing. (The New York Times)

Final Thoughts:

Russia’s ambitious Arctic infrastructure projects are being built in partnership with China; earlier this month at the Shanghai Cooperation Organization’s meeting in Qingdao, China, the Chinese Development Bank agreed to provide $9.5B in funding to Russia’s state-controlled Vnesheconombank (VEB) in order to create a development partnership for the Eurasian Economic Union and the Chinese Belt and Road initiative. China recently passed South Korea to become the world’s second largest importer of liquefied natural gas after Japan, a fuel to which the Asian superpower has turned in the pursuit of cleaner energy. According to the IEA, Chinese demand for liquefied natural gas will grow by 70% from 2017 to 2023, from 51 billion cubic meters to 87 billion cubic meters.

LNG carrier spot rates maintained their strength over the past week, according to Stifel’s First Watch Maritime Update, with east-of-Suez daily rates holding at $70K and west-of-Suez rates steady at $85K. For context, in 2017 those rates averaged $39.9K and $47K, respectively. Stifel forecasts that incremental demand for LNG carrier capacity will outstrip incremental increases in supply in both 2019 and 2020, creating a favorable environment for carriers but potentially hampering producers trying to get their gas to market.

Hammer down everyone!

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