Global Trade Snapshot - "The Pain Is Getting Worse"

Tyler Durden's picture

Via SouthBay Research,

Whether measured in volumes (container throughput via Hong Kong) or in dollars (US Import/Exports), the pain is the same: 16 months of steady collapse in global trade.  

The pain is getting worse. 

More containers are leaving the US and going back to China empty.  From the Port of Long Beach (a major US/China trade port):

  • After unloading cargo in the US, over 60% of inbound containers are leaving empty
  • The rate is the highest since the recession began in 2007
  • More empty containers than export containers: since June 2014, every month with only one exception, there have been more empty outbound containers than loaded export containers  

The global trade slowdown was kicked off in late 2013 when the Chinese government took steps to cool the credit markets.  The bursting of the credit bubble drove a collapse in commodity prices.  Copper, for example, quickly tumbled because 60%~80% of copper imports were used as collateral for loans.

And not just copper.  Commodity-backed loans quickly fell out of favor and physical demand began to drop.  In 2013 iron ore imports to China surged 20%+.  They have fallen -5% since then. 

The bubble was popped, taking demand - and global trade - down with it.  

Put differently, China was on a super cycle fueled by a combination of (1) a capital-intensive infrastructure build-out, (2) increasing penetration of global manufacturing, (3) a credit bubble, and (4) corporate gambling on real estate, commodities, and other assets.  Government measures popped the hot-money and flattened public sector spending.  Commodities and other assets have crashed back to earth, with much pain on the way.

Signs of a Bottom.  But what comes next?

From China (Hong Kong) to Europe, Taiwan and Korea a bottom has formed.

For the US: No Bottom

  • Materials and Agriculture in bad shape
  • Other Exports contracting at faster pace ($ and units) 

A strong dollar contributes to further US trade deterioration. 

Separating the materials pain from other export pain

US export headline figures are bad...

  • YTD (-$87B) Y/Y
  • For 2015, likely to contract (-$100B) Y/Y
  • Cuts GDP by -0.7% 

...But concentrates on commodities

Of the (-$87B drop), most is materials and commodity (i.e. price drops are the big issue)

  • Food/Petroleum/Steel: 70% or (-$61B)
  • Related equipment: 8% or (-$7B).  

US Exports (ex Food, Autos & Oil) are shrinking Faster

Strip out Food, Petroleum & even Auto exports.  Food & Petroleum because price collapses distort the value of trade.  Autos because auto exports are mostly sub-assemblies shipped to Canada and Mexico and re-imported to the US as cars and trucks.  What remains is a true view of demand by US trading partners. 

Strong dollar dulls trade

While total US exports have steadily contracted Y/Y every month in 2015 (except for January), the pace accelerated beginning in August, when the dollar strengthened against global currencies: o Jan-July (7 months): -$27B o Aug-Oct (3 months): -$23B 

Going Forward: Trade Remains Under Pressure

The two engines of growth - China and the US - are stalling again.

Chinese demand is falling back again

The most recent US-China trade data comes out of the Port of Long Beach (November cargo data).  Long Beach is a primary port for China/US trade.  We've already noted the acceleration in empty containers, indicative of even lower China imports from the US.  

Further analysis shows:

  • Trend reversal: export growth has shifted from slight growth to contraction
  • Nominal export volumes are below last year's levels and the lowest since 2011.  

KEY TAKEAWAYS

  • Best case: A bottom has formed and current activity reflects bouncing off the bottom
  • Worst case: China demand is slowing again, with no change likely until late 1Q 2016

US Private Sector demand: No Longer Just Stalling

  • US core goods demand growth has stalled
  • Signs of contraction are popping up  

In a sign of falling consumer and factory demand, US imports (ex Autos, Oil & Cell Phones) have contracted for the 1st time in 2.5 years.   The trend has shifted from stalling to contraction.  No wonder the BDI has fallen again
 

Charting US 'demand' for stuff

From railcar shipments to truck freight, the story is consistent: once we remove the impact of high volume commodities like oil and coal, cargo shipments are heading below last year's levels.

The railcar shipment story reflects the overall global slowdown that began May 2014.

The recent contraction is mostly driven by a collapse in coal shipments, but the general story is no growth in demand.    

The slowdown is also echoed in truck shipping activity.

Trucking activity is a critical data point because ~70% of all goods in the US move by truck.  It is a window into near-term (30~60 day) demand.

Offered here are two different views of trucking conditions today.

Cass is a company providing logistical support to truckers.  Their Freight Index measures cargo shipments.

Note that 2015 shipments have been less than last year's, and have fallen to 2013 levels as of August.

Another view comes from DAT (another trucking support company).  They measure demand in terms of a Load-to-Truck ratio (cargo shipment volumes relative to available truck capacity).  

Again, evidence of decelerating domestic demand and at 2013 levels.

Taken together, the trucking data is consistent with 4Q 2015 GDP of  < 1%.

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uhland62's picture

Where are the weapons exports, where are the payments that countries make for the soldiers (e.g. Marines in Darwin). 

Australia has a persistent trade deficit with trhe US of more than 10 billion on average, year in year out. It is annoying that we cannot address it. Only profits from the China trade can enable us to afford that trade deficit and yet we are supposed to be part of 'containing China' - which does not compute. 

OldPhart's picture

It's kinda hard to export your production when you're a part-time waiter/waitress at Appleby's in Your Town, USA.

Arnold's picture

We package up leftovers to take home. Does that count?

 

 

--Brenda

 

JIMSJOE2's picture

I think that there are several reasons for the empty containers leaving Long Beach. One is that China has been really pushing to build up their domestic economy so what was exported from the US is now being made in China. Another is that because of the US provocations not only in the South China Seas but all over the planet, China has found other suppliers using more products from countries that are part of the new Silk Road. In otherwards they are intentionally cutting trade with the US and having those products imported from others. As Russia and China are now strong allies and with China opposed to the sanctions by the EU and the US, could China be giving the US a taste of there own actions?

Just foof for thought!

Consuelo's picture

How much copper, aluminum, steel, concrete, etc., to build out the new Silk Road...?

Urban Roman's picture

https://twitter.com/sturdyAlex/status/678280274694807552

With the financial crisis in Greece, the only decorations in Crete were these cocks left over from Pride.

besnook's picture

this is good news! those empty containers will be great for an all weather homeless shelter. before all this excess capacity gets absorbed there will be a growth market in homeless shelters.

CHoward's picture

So...things ain't all that awesome. 

silverer's picture

I'm afreight it's as bad as it looks.

Chuckster's picture

Dear Uhland62:

RE: USA low class citizen response

'tis the season to be jolly.  Somehow the shit stain of a federal reserve has kept this ship of financial shit afloat (probably all of western society) for the last 6 years when it should have sank.  The feds will inject more money and as long as the people don't rise up and yell about their money being devalued....they will get away with it.....again.  I am thankful that somehow they kept it afloat.

This time around I see trouble signs from all over the world (bar none) so maybe this time the music stops.  I could see the Chinese overbuilding for a number of years just like Japan did but even more so.  Mr. Trump said China's economy is tipping over and they are devaluing their money and that is causing the world to go into global financial meltdown.  I think that is an over simplification.

Everyone whining about the price of oil and the poor Arab countries may go broke.  Give me a break!  That's all the financial news media in this country can talk about.

 What a happy xmas...but wait...we could go into ww3 and be nuked or have some disgruntled sand duners blow up half the country before the end of the year. The white house would probably praise them.

I like Putin but he is only going to take so much bullshit.  The USA has been like the schoolyard bully for 70 years.  When the bully gets exposed for what he is...the game is over.  Here we are.

Is their an easy way to immigrate to Australia?

willwork4food's picture

I hear Australia is beautiful this time of year. But then you'll miss all the neat shit that's about to blow in the land of the free when O and the sold out Congress tries to take some guns. Word out is that you will have a LOT of SWAT teams dead or handicapped, but then they'll be hailed as heroes on tv for "protecting our freedom" whilist the rebel evil terrorists (the true Americans) will be sought out and slaughtered. But, hey that's OK, because we will know we won't go down like the Russians did cerca Stalin  or Germany cerca Hitler when they jsut slid in at night to dissapear a few people without a fight. This time the bastards will wonder if they make it home to kiss their baby girl.

Aussiekiwi's picture

Aussie is very nice at this time of year, Perth particularly so, no need to worry about missing out on world events, we have the Internet now down under.:)

Killdo's picture

I 've been in Australia since October - it's better than the US (where I live) in every possible respect. America looks like a deteriorating gulag in comparison

August's picture

>>>Is their an easy way to immigrate to Australia?

You need at least 1 million AUD, and a good sales pitch about how skilled and resourceful a business-person you are, and how your business acumen will benefit Australia.  Alternatively, I think it's 5 million in a passive investment to get in.

Otherwise, be young, and hope that your skill-set is in demand in the current Aussie employment market. If you're over 50, forget about it.

FWIW an American friend's bright young daughter spent four or five years in Australia, mostly on a student visa;  when she finally got her degree, she was told she had to leave, period, end of discussion. She was pretty upset about it.

Australia is a decent-enough place - better than most.  It's fairly far gone as a nanny-state, but the government seems to have some residual sense of loyalty to the interest of Australians, as opposed to those of non-Australians.

Killdo's picture

I am looking into visas for Australia - and there are posiblilites even if you are over 50. I see lots of young Europeans I think they get 2 years woeking visas very easily if under 26. Visas and quotas change I think every year. I think it's much easier to immigrate to Australia than to the US or Canada. Min wage is $18.25 and everything seems cheaper than in the US. Poeple are the friednlest I have ever seen, women great and people are infinitely happier and more confident and collabrative than in the USSA (I find most Americans scared of everything and confused - they seem to not really know who the fuck they are - I tell that to my American friends and they agree). It probably comes from early religious brainwashing/fear-mongering / child abuse

PS I have never seen better beaches than the ones I see around Melbourne

Peter Pan's picture

I'm afreight things are not going to get better.

Bemused Observer's picture

I think I may start buying and stashing certain items that seem to be very available right now...unsweetened chocolate, vanilla, cane sugar, etc.

Stuff I REALLY enjoy that is NOT locally able to be made, yet isn't exactly a necessity. I think I can handle some deprivation ok, but if I can still have sweetened chocolate to go with my squirrel-on-a-stick, then hell...why NOT? Might make that squirrel go down a little easier.

If global trade continues to slide, it might be hard to get one's hands on some cocoa or vanilla beans, or some white sugar. Or many other things currently taken for granted.

Shpedly's picture

Squirrels are delicious by the way. I suggest slow pan fried or braised cacciatori style.

stormsailor's picture

make sure you take out the glands under their forelegs, unless you like extra musky.

Yen Cross's picture

Why is the RBA keeping rates artificially raised?

Soul Searching? Commodity prices are going much lower...

Youri Carma's picture

Economic Disaster
17 December 2015, by Sprott Money (Zero Hedge)
http://www.zerohedge.com/news/2015-12-16/economic-disaster

The China Containerized Freight Index Crashes (CCFI) is now 30% below where it had been in February this year and 25% below where it had been 17 years ago at its inception.

For last week, the Shanghai Containerized Freight Index (SCFI) plunged 5.4% to a new record low of 537.73, down 46% from where it had been at its inception in 2009 when it was set at 1,000 – and down 52% from February.

hedgiex's picture

2 gobs spinning away from each other. The nexus btw the real and financial economies are delinking with greater velocity and that's why you call the financial markets deformed with no price discoveries. Capital consumption/destruction in the real economies and that's where the predators/vultures are perched. The preys are in the vises of these 2 gobs. 

kaboomnomic's picture

Well.. that's to be expected.

Dollar sky high value. Makes EM companies avoids it. Luckily there's yuan swaps. So debt now created NOT in DM currencies but yuans.

Bad news for DM currencies..

Cloud9.5's picture

Help people if you can on the way down.  At the end of the the game we all wind up in a box.  Nobody remembers the winners and losers.  It matters how you play the game.  Merry Christmas guys and gals.