Asian Cargo to the US Flashes a Red Flag
We continue to see weakness in the international shipping sector – last month we highlighted the slowdown at U.S. ports and today Bloomberg is reporting the first drop in cargo volume to the U.S. from Asia since late 2009. Not dramatic drop offs, but more signals of very sluggish action.
These data points continue to be interesting as the market goes in one direction, and we wait to see if ECRI’s recession call will be validated over the next 6 months. (generally the time it takes markets to recognize a recession from the time ECRI makes the call). On a side note – I’d like to highlight once more that Walmart (NYSE:WMT) is breaking out…. not something you want to see as a bull. Last time Walmart showed acted like this you can guess what happened to the economy.
- U.S. imports on the world’s biggest trading route are dropping for the first time in almost two years as consumer confidence weakens to the lowest level since the recession that ended in 2009. Container volumes on the Asia-to-U.S. route fell 3.8 percent in the third quarter, the first decline since the last three months of 2009, according to Newark, New Jersey-based PIERS, a unit of UBM Global Trade that compiles cargo data. The slump probably continued last month, said Mario Moreno, a UBM economist.
- Rates for 40-foot containers to the West Coast, a benchmark, tumbled 24 percent this year, according to data from Clarkson Plc, the world’s biggest shipbroker.
- “This is another piece of data that suggests growth will remain slow for the foreseeable future,” said Mark Vitner, a senior economist at Wells Fargo Securities LLC. “Consumers are still getting used to the idea that they are not going to make as much money or accumulate as much wealth as they thought they would a few years ago.”
- Ships from Asia to Europe, the second-biggest trade route, are doing even worse, with rates of $613 per 20-foot box, Clarkson data show. Maersk estimates the fuel charges at $800, implying a loss of $187 on every container.
- Analysts expect the slump from Asia to the U.S. to end. Volumes to the West Coast will rise 6 percent to the equivalent of 14.1 million 20-foot containers next year, from 13.3 million this year, according to Clarkson. While that’s 24 percent more than in 2009, it would still be fewer than the 14.4 million in 2007, the data show. Trade back to Asia will also advance, climbing almost 8 percent to 8.3 million units in 2012, Clarkson estimates.
- Growth in world trade will expand 5.8 percent next year, compared with 7.5 percent in 2010, the International Monetary Fund estimates, and about 90 percent moves by sea, according to the Round Table of International Shipping Associations.
- Furniture is the single largest item brought into the U.S. by container, he said. Boxes from Asia accounted for 75 percent of total container trade into the country last year.
Trader Mark is the author of Fund My Mutual Fund.