New export orders from China rose in July, but the expansion is not enough to help the shipping industry recover, according to a new report from the Baltic and International Maritime Council (BIMCO).
China’s New Export Orders Index rose to 48.4 in July but more new export orders are needed to stage a sustainable recovery for the global container shipping industry, the report said.
“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,” said BIMCO’s chief shipping analyst Peter Sand.
While China’s New Export Orders Purchasing Managers Index (PMI) sub-index reached a six-month high of 48.4 in July, it remained below the 50.0 no-change mark, indicating contraction for the seventh 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, said BIMCO.
What is required for demand growth to return is for the COVID-19 pandemic to be under control in Europe and North America, the organization said.
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.
The World Trade Organization has estimated that global trade declined by 18.5% in the second quarter year-on-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,” said Sand.
China production activity grows further
Relatedly, IHS Markit and Caixin Insight Group has reported that China’s General Manufacturing Purchasing Managers’ Index (PMI) rose to 52.8 in July from 51.2 in June. This, they said, signalled a further improvement in the health of the Chinese manufacturing economy as the domestic epidemic has been largely put under control.
But while factory output and total new orders both hit their highest levels in July since January 2011, new export orders continued to be weak, although new business from overseas fell at the slowest rate for six months, they confirmed.
New export orders remained in contraction territory for the seventh consecutive month in July, said the report. “Although the pace of the contraction slowed, overseas demand remained a drag on overall demand.”
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