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APAC exports are forecast to show a strong rebound of 11.5%
in 2021, after contracting by 5.1% in 2020. IHS Markit estimates
that global trade volume contracted by an estimated -11.2% in 2020.
A recovery is forecast in 2021 and 2022, with global trade volume
to recover by 7.5% and 4.1%, respectively.
Surging Asia-Pacific exports have created shipping container
shortages, with the price of containers on Asia-US and Asia-EU
shipping routes having soared since mid-2020. Meanwhile, the strong
rebound in global electronics demand has also created supply
bottlenecks for electronics manufacturing firms, with shortages of
semiconductors having already resulted in disruptions to auto
production for some major auto manufacturers during the first
quarter of 2021.
Recovery in APAC Exports
The Asia-Pacific (APAC) region experienced a severe recession in
2020 due to the COVID-19 pandemic, with APAC GDP contracting by an
estimated 1.2% year-on-year (y/y). Pandemic-related lockdowns and
travel bans had a severe negative impact on the economies of most
APAC nations during the first half of 2020. However, during the
second half of 2020, many Asia-Pacific economies had shown a
significant recovery in economic momentum. This upturn was driven
both by strengthening global export demand as well as the rebound
in domestic consumption spending as a result of the easing of
pandemic-related restrictions in many countries.
A strong economic recovery is expected in 2021, with APAC GDP
growth forecast at 5.8%, based on expectations that the progressive
rollout of COVID-19 vaccines during 2021 will help the gradual
recovery of economic activity in many OECD and APAC economies.
A key factor underpinning the strong economic rebound in the
APAC region is expected to be buoyant economic growth in China,
which is forecast to grow at 7.6% in 2021. The Asia-Pacific
recovery is expected to be broad-based, with most major
Asia-Pacific economies forecast to show rapid growth in 2021.
Exports from many Asian economies have already shown a strong
rebound since mid-2020 as consumer demand in the US and EU has
strengthened. China's exports rose by 18.1% year-on-year in
December 2020, while Japan's exports rose by 6.4% y/y, South Korean
exports were up 11.4% y/y and Singapore's exports were up 12.8% y/y
in January 2021.
APAC manufacturing output and new export
orders
APAC export growth forecast, 2021
APAC shipping container shortages escalate
The current state of the container shipping market can best be
explained by consumers in locked down countries in North America
and Western Europe with money to spend embarking on a spending
spree for Asian produced consumer goods. This has created
logistical problems, resulting in supply chain bottlenecks and
empty shipping containers in the wrong locations.
What was different this time round is that container shipping
industry was, for the first time in years, in a much better
position to ride out a crisis and weathered the COVID-19 hit far
better than during the Global Financial Crisis. Industry
consolidation over the last few years drove a newfound resolve by
the shipping companies to exercise exceptional capacity discipline.
Industry's pricing power, which has long been elusive, came back
ferociously once demand started recovering. Demand destruction was
short lived, recovery has been swift and exceeded expectations amid
consumer demand shifts.
This demand surge has come at a time when container supply was
scaled back, container positioning was all over the place and large
bottlenecks have emerged.
Particularly, In the second half of 2020, a shortage of empty
containers in key exporting hubs in Asia and a delay in the return
of containers to the quayside in the US have led to equipment
shortages in key exporting regions and one of the key reasons for
spot rates to scale record highs. Amid surging consumer demand,
equipment imbalances and tight supply is driving record freight
rates.
Container demand recovery is benefiting from stay-at-home
consumer goods imports, which are getting higher wallet share amid
consumer demand shifts. US imports during 2020 have been a tale of
two halves. US imports from Asia declined 10.7% in the first half
of 2020 from the same period in 2019, according to the IHS Markit PIERS database. US imports from Asia
in the second half of 2020 were up 16.9% from the second half of
2019; imports for the calendar year ended up 4.1% higher. Asia-US
container volume growth has far outpaced Asia-Europe and Intra-Asia
demand.
There has been relentless growth in consumer demand and its
positively impacting container demand. This is likely to sustain in
H1 2021 and roll over in H2 2021. The data from the IHS Markit PIERS database, looking at some of
the specific HS codes the US TEU imports have hit record, for
stay-at-home goods, such as furniture, home improvements and
consumer electronics. With another round of fiscal stimulus being
implemented in the US by the incoming Biden Administration,
consumer spending and container demand will remain strong.
US monthly container imports (TEU) - Electric, TV, Sound
Equipment
The biggest and most positive impact of record high spot rates
will be on the annual contract freight rate increases which as
could be as high as 40-50% this year. However, we expect demand
growth should start to temper after the peak in H1 2021. Temporal
dislocation of container boxes and high congestion will eventually
be resolved but not before H2 2021 and spot rates should start
peaking well before the industry fundamentals soften.
APAC Electronics Supply Chain Disruptions
In addition to the severe logistical problems to APAC shipping
created by container shortages, the global electronics industry has
also suffered from supply chain disruptions during late 2020 and
early 2021.
The IHS Markit Global Electronics Purchasing Managers' Index
(PMI) has signalled a strong rebound in global electronics orders
since mid-2020 as global lockdowns were eased and consumer spending
rebounded in many major economies. The IHS Markit Global
Electronics PMI new orders index rose from a calendar year-to-date
low of 35.0 in May 2020 to a level of 53.4 by January 2021,
reflecting a significant recovery in new orders.
IHS Markit Global Electronics PMI
However surging demand for semiconductors has outpaced
production, resulting in semiconductors shortages that are
impacting on production in key manufacturing industries such as
autos.
The South Korean Ministry of Trade, Industry and Energy
announced that South Korea's exports of information and
communications technology (ICT) goods in December 2020 amounted to
USD 18 billion, up 24.9% compared to the same period last year.
Exports of semiconductors rose by 30% y/y, while exports of display
panels rose by 31% y/y. Exports of mobile phones rose by 48%
y/y.
South Korea's Ministry of Trade, Industry and Energy has
projected that South Korean semiconductors exports in 2021 will
rise by around 10% to USD 109 billion, due to buoyant global demand
for electronics products.
With significant shortages of semiconductors having become
evident during early 2021, this is expected to further boost South
Korean semiconductors exports during 2021.
Taiwan's exports of electronics products surged in January 2021,
rising by 47.5% y/y to USD 13.3 billion. Exports of semiconductors
rose by 46.3% y/y, while exports of optical devices rose by 53.5%
y/y. Due to strong global demand for computers, TVs and auto
electronics, a severe shortage of semiconductor chips has developed
in recent months.
Chip stockpiling during 2020 due to US government sanctions on
certain Chinese technology companies have also contributed to the
shortages. Global auto manufacturers as well as smartphone
producers are among the industry segments that have been impacted
by these shortages. According to IHS Markit Automotive research,
vehicle manufacturers are finding increased disruption to the
supply of systems using semiconductors in the first quarter of
2021. Many automakers worldwide have reported disruptions to
production due to shortages of semiconductors, including Ford, VW
Group, GM, Honda and Mazda. (IHS Markit Automotive, 22nd February
2021, "Semiconductor Supply Issue: Light Vehicle Production
Tracker").
The extent of the shortages of critical electronics components
has become so severe that high level consultations have been held
with Taiwan involving key industry bodies as well as government
officials from major industrial economies including the US and
Germany. On 24th February, US President Biden signed an executive
order for a US government review of US supply chain vulnerability
for critical materials, including for semiconductors.
The shortage of semiconductors has driven up capital expenditure
plans, with Taiwan's TSMC, the world's largest chipmaker, having
announced plans to increase capital spending on production and
development of advanced chips to a range of USD 25 billion to USD
28 billion in 2021, a 60% increase on 2020. Taiwan's UMC, which
also manufactures chips, plans to lift spending on new capital
equipment by around 50% in 2021.
Recent power disruptions in Texas due to severe winter weather
has added to the supply chain disruptions to global semiconductors
output, with Texan semiconductors plants of Samsung, NXP
Semiconductors and Infineon Technologies among the semiconductors
manufacturers whose production in Texas has been disrupted.
APAC Trade Outlook
The central case global economic scenario for 2021 is positive,
with the world economy forecast to show improving momentum through
the course of 2021 as COVID-19 vaccination programs are rolled out.
Many of the world's largest economies, including the US, EU, Japan,
China and India, are expected to be rapidly progressing with
vaccination programs during the first half of 2021.
This should allow domestic demand to strengthen in these
economies, with gradual easing of lockdown conditions in countries
in this grouping that are currently experiencing significant new
waves of COVID-19 cases. Consequently, this should help to support
the strong rebound in world exports during 2021, which are forecast
to grow 12.4% following a severe contraction of 10.3% in 2020.
However, there is increasing evidence that the strong rebound in
manufacturing exports has created significant logistical problems,
with shipping container costs for Asian shipments to the US and EU
having soared. Meanwhile the global electronics industry is
suffering from semiconductors shortages that are disrupting
production in some industries, notably the automotive sector.
However, these disruptions to global supply chains are expected to
be temporary, with conditions expected to improve in the second
half of 2021.
Posted 26 February 2021 by Rahul Kapoor, Vice President & Head of Commodity Analytics & Research, Maritime, Trade & Supply Chain, S&P Global Market Intelligence and
Rajiv Biswas, Executive Director and Asia-Pacific Chief Economist, S&P Global Market Intelligence
