Global trade showing signs of slowing down

Signals of global trade still show signs of activity slowing down. The World Trade Organisation (WTO) recorded a decrease in the volume of world merchandise trade of 0.8% year-on-year in the fourth quarter (4Q2022). Preliminary data suggests that 1Q2023 will remain depressed as well, according to Simonis Storm.However, the WTO forecasts that 2Q2023 will be the turning point for trade activity. Signs of weakness were recorded in container shipping, air freight and electronic components, while raw materials were moderate. Indeed, reduced factory and export orders have lowered metal prices, which is a negative for local mines in Namibia.Taiwan announced its exports slumped by 16% year-on-year in April 2023, and South Africa’s trade narrowed in both export (14.5% month-on-month) and import (13.5% month-on-month) activity in April 2023, according to Investec.US port data shows that import volumes fell to the lowest levels since May 2020. Imports in the EU decreased by 12.6% year-on-year in April 2023, signalling lower demand amongst European consumers. On the other hand, China’s growth in exports hit a record high in April 2023, but this was due to a low base effect.Consensus views caution that export growth going forward is likely to trend downward due to higher interest rates, inflation and subdued consumer demand. China’s weaker-than-expected import data for April 2023, driven by consumer spending rather than infrastructure and property investment, reduced demand for copper, iron ore and crude oil.Shipping costs of raw materials have been on a downward trend since their pandemic peak in September 2021, according to the Baltic Dry Index (BDI). The BDI is currently 18.1% of its pandemic peak at the start of June 2023, indicating that shipping rates have largely normalised and could add deflationary pressures to imports.PeakThis decrease from the peak (September 2021) was driven mainly by an 86.8% decrease in the Baltic Capesize Index (BCI), which tracks the rates for large bulk carriers, typically transporting iron and coal. Also, the Baltic Supramax Index (BSI), which tracks the rates for smaller bulk carriers recorded a 76.3% decrease from the pandemic peak. Lastly, the Baltic Panamax Index (BPI), tracks the rates for medium sized vessels which travel through the Panama Canal, decreased by 73.9% since the peak in September 2021.Following global trends, trade activity in Namibia has slowed in April 2023. Total trade decreased by 2.0% year-on-year and 27.6% month-on-month within the month under review. This is the second worst performing April in the last five years with a total trade value of N$ 16.4 billion being recorded, compared to N$11.1 billion in April 2020. Additionally, trade activity since the start of the year declined by 11.5%, Simonis Storm pointed out.The outlook on trade looks bleak in the very short-term and Namibia will not be shielded by lower global demand, production and consumer spending. For now, the Rand has weakened by more than metal price declines and so could contribute positively to export earnings. Going forward, the risks remain to the downside in terms of demand for Namibia’s commodity exports.“Factory and export orders of our trading partners are under pressure and could only get worse once the much anticipated recessions take place. This could weigh on medium-term economic growth in Namibia, given the mining sector’s dominant contribution to our gross domestic product (GDP) growth rates,” Simonis Storm said.

Global trade showing signs of slowing down

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Republikein 2025-05-05

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Global trade showing signs of slowing down

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