China’s New Export Orders Index rose to 48.4 in July but much more is needed for the country’s manufacturing industry to close the gap, and more new export orders are needed to stage a sustainable recovery for the global container shipping industry.
“New manufacturing export orders out of China have not experienced growth since December 2019. Obviously, this is not a good scenario for an international industry that feeds on globalisation and ever-growing volumes sailed over great distances,” says BIMCO’s Chief Shipping Analyst, Peter Sand.
While the New Export Orders PMI sub-index reached a 6-month high of 48.4 in July it remained below the 50.0 no-change mark, indicating contraction, for the 7th month in a row.
The New Domestic Orders Index, which closely tracks the headline PMI, also reflects the ongoing slow and gradual recovery in domestic demand for manufactured goods. For the intra-Asian container shipping market to flourish once again, overseas demand is strongly required. Intra-Asian container demand fell by 7.3% during the first five months of 2020.
What is required for demand growth to return is for the COVID-19 pandemic to be under control in Europe and North America. While the former is steadily re-opening, the latter is still riding the first wave of the outbreak, but managed to stage an improvement in manufacturing conditions for the first time since February, as US PMI hit 50.9 in July. Meanwhile in Asia: Hong Kong, Australia and Japan are reinstating containment measures.
In India and Russia, the July PMIs were lower than in June, with neither exceeding the 50.0 no-change mark. Struggles also continue in South Korea where the Manufacturing PMI reached 46.9 in July, up from 43.4 in June.
World trade fell by an estimated 18.5% in the second quarter
WTO has estimated that global trade declined by 18.5% in Q2 (compared with Q2 last year), when containment measures were in place across the globe.
“Bearing in mind that the global trade of merchandise goods already declined slightly (-0.1%) in 2019, the return of pre-pandemic demand is nowhere in sight. A recovery in demand will take a long time,” says Sand.