Trade Lanes Summary

Emerging market merchandise trade volumes, six-month average, % change on a year earlier


Emerging market merchandise trade volumes, six-month average, % change on a year earlier

 

After a strong 2017, emerging market trade volume growth has slowed. From January to September 2018, measured monthly, year-on-year growth of emerging markets trade volumes has averaged 6.2% for imports and 3.3% for exports. For all of 2017, the corresponding averages were 7.2% and 4.3% respectively.
 
On a regional basis, trade growth has been strongest in emerging Asia, with average import volume growth of 7.4% and export volume growth of 4.8%. Eastern Europe/CIS has seen import and export volume growth figures of 2.5% and 4.9% respectively. In Latin America, export volume growth has been slow, expanding by just 0.9%, although imports grew by 5.8%. Volume growth in the Middle East and Africa has been weak, with import and export expansions of 0.6% and 0.4% respectively.
 
Asian import growth is being caused by growing consumer demand in China and higher imports from South-East Asian producers, due to shift of supply chains to lower cost manufacturing bases. Higher commodity prices have also strengthened imports for a number of resource-exporting countries. This is because higher revenues from commodities give greater spending power to resource-exporting countries.
 
Air freight volumes have returned to low single-digit growth after a bumper 2017. During that year, a surge in global demand began an inventory re-stocking cycle which drove market growth in air freight, as shippers rushed to get goods to market. This faded a few months into 2018 and growth has reduced down to low single-digit percentage increases since then. According to IATA’s October 2018 Air Freight Market Analysis, growth in freight-tonne kilometres is now expected to underperform compared against global goods trade in 2018.
 

 

Considering all air and sea freight volumes (excluding oil for sea), trade between the emerging markets in this index and the EU and US is down from 2017. The only improvement in growth rates is in sea freight imports, but even here, growth is negative. Much of the decline in growth in this lane can be accounted for by bulk goods, so freight forwarders ought to be witnessing stronger growth than this figure suggests.

 

US Trade Deficit Reduction

  Us Exports Chinese Exports
Sea Freight Value Change YoY (Excludeds HS Code 27:Oil) -10.50% 4.00%
Sea Freight Volume Change YoY (Excludeds HS Code 27:Oil) -25.80% 7.50%
Air Freight Value Change YoY -16.40% 6.20%
Air Freight Volume Change YoY -8.10% 11.10%
Source: USA Census Bureau

Emerging Markets Imports: 2012-2018 Top 5 Trend


Air Freight Top 5 Trade Lanes – EU/US to Emerging Markets

 

Air Freight Top 5 Trade Lanes – EU/US to Emerging Markets
Rank Origin Destination 2012 index 2013 index 2014 index 2015 index 2016 index 2017 index 2018* index
1 EU China 100 127 112 132 138 160 161
2 US China 100 101 108 118 122 143 154
3 EU United Arab Emirates 100 108 118 122 143 160 163
4 EU India 100 92 97 98 110 122 132
5 EU Mexico 100 94 98 120 130 154 182
EU and US All 50 EM 100 107 113 117 116 124 133

 


Sea Freight Top 5 Trade Lanes – EU/US to Emerging Markets

 

Sea Freight Top 5 Trade Lanes – EU/US to Emerging Markets
Rank Origin Destination 2012 index 2013 index 2014 index 2015 index 2016 index 2017 index 2018* index
1 US China 100 105 107 105 110 101 75
2 EU China 100 103 104 109 103 105 96
3 EU Turkey 100 104 103 99 104 119 112
4 US Mexico 100 91 96 104 114 124 125
5 EU Saudi Arabia 100 123 107 126 128 119 120
EU and US All 50 EM 100 105 108 106 109 107 106

2018 Emerging Markets Import Growth

Emerging markets look set to have a mixed year in terms of imports from the EU and US. Sea freight imports performed better than in 2017, but still fell by 1.2% in volume terms. In air freight, volumes grew by 4.0%, down from 9.5% in 2017. Despite the widely reported issues around emerging market currency weakness, the overall picture remains broadly quite positive.
 
There are a number of notable stories that emerge when looking at individual country trade lanes. The most striking of which relates to China’s sea freight. Its retaliatory tariffs to US measures are having a profound effect on sea freight imports, which are forecast to fall by more than a quarter in 2018. In the first nine months of the year, volumes of cereals were down 40.7% and oil seeds, grains, fruit and plant were down 42.5%. These two product groups alone account for 8m tonnes of lost volume. Additionally, the fall in volumes, which also accounts for the majority of the decline in the European trade lane, can be attributed to China’s ban on waste imports implemented earlier this year.
 
Removing China from the equation presents a very different picture for emerging market imports by sea. Growth is forecast at 5.7% year-on-year excluding China. Among the largest lanes, EU-Algeria, US-Colombia and EU-India are the only ones expected to show substantive growth. Outside of the largest markets, US-Tunisia, US-Egypt and US-Vietnam were standout performers.
 
Air freight volume growth is down quite substantially from the year before, (4.0% versus 9.5% last year), but this is to be expected following the strong economic growth rates in 2017. Air freight volumes usually expand quite significantly when global demand surges, as shippers rush to re-stock inventories. This cycle is now over and growth has now returned to lower levels.
 
Unlike sea freight, Chinese air imports from both the EU and US are expected to grow year-on-year. Imports from the US are expected to grow by 7.7%, but this may be dampened by recent tariff impositions. Amongst the top 10 markets, European exports to Russia, India, Brazil, Turkey and Mexico are expected to perform well, for different reasons. Russia and Turkey are importing more oil-based products and lubricants. Indian import growth is largely accounted for by machinery, whilst Brazilian automotive parts imports are feeding its booming finished vehicle export market. Mexican steel imports from the EU account for a large proportion of its growth, after various dumping duties and protectionist policies were applied to other trading partners.
 
A look at the fastest growing lanes shows strength in US exports to South-East Asia, with the Philippines, Malaysia, Indonesia and Vietnam among some of the fastest growers. This can largely be attributed to strength in the electronics sector, and more specifically the semiconductor industry which forms part of the US’ fastest growing exports. The region is home to a growing number of lower-cost fabrication plants, utilised by US, Korean, Japanese, Chinese and Taiwanese firms. These generally provide lower value-added manufacturing services than plants in US, but the globalised nature of the high-tech supply chain means the region is sharing in the US’ growth story.

Emerging Markets Exports: 2012-2018 Top 5 Trend


Air Freight Top 5 Trade Lanes – EU/US to Emerging Markets

 

Air Freight Top 5 Trade Lanes – EU/US to Emerging Markets
Rank Origin Destination 2012 index 2013 index 2014 index 2015 index 2016 index 2017 index 2018* index
1 EU China 100 122 145 120 136 144 158
2 US China 100 98 116 122 111 124 129
3 EU India 100 106 112 106 111 124 129
4 EU Kenya 100 106 112 106 112 137 135
5 US Colombia 100 106 112 106 112 137 135
EU and US All 50 EM 100 108 119 116 119 129 135

 


Sea Freight Top 5 Trade Lanes – EU/US to Emerging Markets

 

Sea Freight Top 5 Trade Lanes – EU/US to Emerging Markets
Rank Origin Destination 2012 index 2013 index 2014 index 2015 index 2016 index 2017 index 2018* index
1 US China 100 103 116 120 116 123 128
2 EU China 100 110 121 122 122 123 133
3 EU Russia 100 96 115 121 113 111 130
4 EU Brazil 100 102 119 125 124 146 159
5 EU Ukraine 100 102 119 125 124 146 159
EU and US All 50 EM 100 107 113 117 116 124 133

2018 Emerging Markets Export Growth

In both sea and air freight, emerging market export volume growth is expected to fall in 2018. However, export growth in sea and air of 6.6% and 4.5% respectively still outpaces import growth in both modes. A stronger US dollar, as well as currency weakness in the likes of Brazil, Turkey, Argentina and Indonesia, could be making emerging market exports more competitive on at a global level. However, the more difficult operating conditions in these economies could also be stifling growth somewhat.
 
Despite tariff implementations, Chinese exports to the US are expected to grow in volume terms in both sea freight (+4.3%) and air freight (+3.8%). Exports to the EU are projected to be even stronger (+9.6% by air and +7.8% by sea).
 
Among the largest markets, Russia and Turkey are expected to show strong export growth to the EU, due to strong performance in the steel sector. Despite tariff impositions and trade tensions, Mexico-US sea freight growth is expected to be strong, growing by 16.3% for the year. Salts and steel exports have grown particularly fast in the first nine months of 2018. The latter product benefits from tariffs being applied three months later than those applied to other trade partners. Also of interest is auto exports – 2.34m vehicles were shipped to the US in the first 11 months of 2018, up 9.3% year-over-year. The automotive sector has been a key focus of the Trump administration’s NAFTA renegotiations and in future, the USMCA states that 25% tariffs could be applied to Mexican vehicle exports to the US after a 2.4m vehicle limit is reached.
 
A number of smaller trade lanes are expected to be the fastest-growing in 2018, including Kazakhstan-EU, Iran-EU, Qatar-US and Egypt-US. Chile-US is the only trade lane with expected volumes of above 10m tonnes to appear in the top 10 fastest-growing trade lanes.
 
In air freight, the reduction in export volume growth from 2017 is less severe overall than imports. Growth of 4.5% is mainly driven by exports to the EU. The largest markets show mixed performances. EU-India, EU-Kenya, US-India and US-Vietnam are all expected to see contractions. Meanwhile, EU-Mexico should be strong, helped by improving trading relations. After signing an Agreement in Principle for an FTA, Mexico’s export growth could be boosted in the coming years. However, this year it will be surpassed by extraordinarily strong growth in US-Chile and EU-Bangladesh lanes.
 
Among the fastest growing air freight trade lanes, South American countries account for five of the top 10, with Chile appearing twice after a surge in fish exports. Thailand is the only other country to appear twice as a result of its booming high tech and apparel industries.

News Release

The survey of more than 500 global logistics and supply chain executives is part of the 2019 Agility Emerging Markets Logistics Index, an annual snapshot of industry sentiment and a ranking of the world’s 50 leading emerging markets by size, business conditions, infrastructure and transport connections.

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