Top 10 International Trade Trends Going Into 2022

Top 10 International Trade Trends Going Into 2022

Amid U.S.-China tensions, Brexit, and other political threats to the world economy, global trade looks as resilient as ever heading into 2022.

Just look at the supply chain crisis of 2021. When crippling gridlock seemed possible, what the world got instead was a lesson in the staying power of ports, trucking companies, and shipping lines across the world.

The $8.6 trillion global logistics industry, it turns out, remains robust enough to get goods from any producer to almost any buyer or consumer on earth. The World Trade Organization now expects global trade to increase 4.7% in 2022, after rising 10.8% in 2021. Total trade in goods and services is expected to reach $28 trillion for 2021 according to UNCTAD.

Even demand-side news has been good. The world’s richest economy, the U.S., is still riding the benefits of trillion-dollar stimulus packages. U.S. gross domestic product is believed to have grown 7% in the last quarter of 2021, up from 2% in the preceding quarter. And when American consumers are buying, the whole world benefits.

Here are the top 10 ongoing trade trends at the start of 2022:

1.   China Close to Passing U.S. as World’s Top Importer

In 2001, the year China joined the WTO, it was already the world’s fourth biggest importer, behind the U.S., Japan, and France. Global trade leaders figured it wouldn’t take long for a country of billion-plus consumers to open itself up and become the world’s biggest importer. Instead, the U.S. has continued to be the world’s biggest buyer of goods, the biggest reason that Washington maintains leverage in trade negotiations. However, in the first 10 months of 2021, the U.S. imported $2.3 trillion worth of goods, compared to $2.2 trillion for China. It appears highly likely that in 2022, China will at last pass the U.S. to become the world’s top importer.

2.   Asian Manufacturing Diversifies

The new Regional Comprehensive Economic Partnership, or RCEP, is set to knock out over 90% of tariffs in 15-nation Asian bloc led by China. The treaty, which does not include the U.S., will accelerate a trends set in motion by trade tensions between China and the U.S., and worries about supply chains. These have pushed manufacturers to build plants in countries like Vietnam, Thailand and Singapore. For example, Chinese shipments of mobile phones, the ultimate complicated manufactured high-tech consumer good, fell 19.7% in November to $16.5 billion from $20.6 billion. The country still shipped out 88.7 million phones, but that was a 18.8% decline from 109.2 million a year ago. The proliferation of new supply chains across Asia is why Chinese imports from ASEAN countries in November rose 34.9% to $38.5 billion from $28.5 billion, the biggest jump in imports from any major region. By comparison, imports from the U.S. rose 22.1%, to $17.8 billion from $14.6 billion, while shipments from the European Union imports increased only 6.8% to $27.3 billion from $25.6 billion.

3.   Commodity Prices Boom Amid Scramble for Resources

The work-from-home economy and industrial activity picking up have generated a booming demand for power around the world, despite fears about climate change. And that’s forced up prices. For example, Chinese natural gas imports rose 17.8% to 10.7 million tons from 9.1 million tons a year ago, while, by value, they increased a whopping 169.8%. At the same China, cut crude oil imports 8% to 41.8 million tons from 45.4 million tons, although imports by value rose 73.7% to $24.6 billion from $14.2 billion. Prices for everything from soybeans to iron ore rose in 2021, part of a wave of inflation sweeping the globe that is likely continue into 2022.

4.   U.S. Hikes Energy Exports

 From gas fields in Texas to coal mines in Appalachia, the U.S. has always been energy rich. Now, it’s becoming a chief supplier of energy to countries around the world, trade statistics show. With new terminals for exporting gas and coal, the U.S. has emerged as the world’s dominant, and most diversified, energy supplier. The U.S. exported $189.4 billion worth of mineral fuels in the first 10 months of 2021, up 53% from $123.4 billion over the same period in 2021. Coal exports increased 49% to $7.3 billion. Energy experts the U.S. to remain dominant in energy production and exports for decades to come.

5.   High-Tech Trade Booms

The prevalence of lockdowns, boosted further by the omicron crisis, has solidified people’s habits around the world. Home workers have been buying computers, routers, and other gear to transform their home spaces into offices. The recent omicron wave of the Covid-19 virus will perpetuate people’s habits and buying patterns into 2022. In the first nine months of 2021, Chinese high-tech imports increased 24% to $560.4 billion; U.S. imports went up 16% to $419.2 billion; and European Union imports rose 18% to $332.8 billion.

6.   Cars Go Electric

Global electric car sales are expected to top $800 billion by 2027, more than double the current value of the market. Overall, around five million electric cars are expected to be sold in 2021, driven by evolving technology, and fears about climate change. And it’s showing up in trade statistics. The top market, Germany, increased imports of electric cars 138% to $6.1 billion in the first nine months of 2021. The second biggest market was the UK, which hiked imports 121% to $5.2 billion. The world’s top exporter was Germany, which increased shipments 110% to $10.6 billion.

7.   Batteries Needed

That’s boosted the trade in materials related to making batteries. Chinese exports of lithium batteries increased 78% to $25 billion from $14 billion during the first 11 months of 2021. It’s getting raw materials from Latin America. The world’s top two exporters of the raw material needed to make electric batteries — lithium carbonate — are Chile and Argentina, according to an analysis by Trade Data Monitor. But now the Latin American countries have been changing where they ship the material crucial to manufacturing electric vehicles. Increasingly, they’re sending lithium to China, as that country develops its own battery supply chain, instead of other key markets like Japan, South Korea and the U.S., according to TDM.

8. U.S. Consumers Lead Recovery from Covid.

U.S. imports have driven global manufacturing and the recovery of the global economy. In the first ten months of 2021, U.S. imports increased 21.4%, rising to $2.3 trillion from $1.9 trillion. U.S. consumers have been buying a lot of everything. Furniture imports, for example, were up 26% to $60.9 billion, part of the transition to a stay-at-home economy. Vehicle imports increased 16% to $227.7 billion. Even if it’s passed by China in 2022, there’s no sign that the U.S. will cease to be a lucrative consumer markets for the world’s top manufacturing corporations.

9. Fears of Supply Chain Meltdown Overblown

After a summer of stories about container ships crammed together by ports and in canals, trade rebounded in the fall. For the first 10 months of 2021, the Port of Los Angeles, the top U.S. port, registered imports of $226.9 billion, up 20% from $188.4 billion during the same time period in 2020. (TDM’s database includes shipments by port for several countries.) Other U.S. ports registered similar increases. It seems unlikely that the container shipping industry will retreat in the forseeable future. It is the anchor of the hyperglobalization that now dominates the economy.

10. Coal is… Back

Despite the renewed focus on the climate, coal trade boomed in 2021. The world simply doesn’t have enough fuel capacity, even with the addition of renewable sources like wind, hydro, and solar. U.S. coal exports, for example, increased 49% to $7.3 billion over the first ten months of 2021. China more than tripled imports of coal by quantity, hiking purchases to 35 million tons in November, up from 11.7 million tons in the same month a year ago. By value, shipments grew a whopping 761.8%, rising to $5.9 billion from $681 million. China’s top sources of coal are Indonesia, Russia, Mongolia and the U.S. Chinese coal imports from the U.S. increased 993.4% in the first ten months of 2021, to 8 million tons, from 733,789 tons over the same time period in 2020, according to International data. Imports from Indonesia leapt 60.3% and those from Russia grew 82.2% while shipments from Mongolia fell 43%.

DIGITIZATION’S NEXT FRONTIER: NON-FUNGIBLE TOKENS A GAME CHANGER FOR TRADE FINANCE?

Trade finance is known for its stubbornness in the face of change. Even as the world has gone digital, paper-based manual processes remain commonplace across the complex network of counterparties involved in financing global trade. Thankfully, the tide is now turning.  The operational challenges of relying on manual processes and systems are well known and much maligned across the industry–incorrect documentation and KYC, non-interoperable systems, manual reconciliation, poor visibility, excessive costs, to name just a few.

Digital solutions have emerged in many different shapes and sizes, but one of the technologies which seems most encouraging is enterprise blockchain. Trade is a fundamentally decentralized system. The industry is heavily intermediated–predominantly by banks that help to facilitate transactions and provide the financing behind them, but also by insurers, customs officials and other market participants. Firms have tried countless times to apply centralized solutions to this decentralized system but, unsurprisingly, none have really worked. 

The decentralized nature of blockchain makes it a perfect fit for trade finance. For the first time, the entire industry is getting behind a technology and moving it into real world deployment at a record pace. The architecture underpinning the entire ecosystem of trade is undergoing complete digital transformation, and exciting new blockchain-enabled developments continue to emerge. One such development is non-fungible tokens, or NFTs. But what are they and how do they benefit participants? 

WHAT IS AN NFT?

A non-fungible token is a unique and non-interchangeable unit of data stored on a digital ledger. NFTs use blockchain technology to provide a public proof of ownership. You’ve probably heard of NFTs in the entertainment industry, largely because they can be associated as unique items with easily reproducible items such as photos, videos, audio and other types of digital files. But they also have wide applicability in the financial services space–and specifically in trade finance. 

It’s important to note that an NFT is simply a specific type of tokenization. Once a trade finance document or obligation has been tokenized, it can be referred to as an NFT. By contrast, a smart contract is a digital contract, stored on blockchain, which will execute once specified conditions are met. In the case of trade finance asset distribution, both smart contracts and tokenization work together to facilitate this activity.

WHAT ARE THE BENEFITS OF NFTs IN TRADE FINANCE?

In reality, NFTs for trade finance have been around for some time, though we’ve only just begun to describe them this way. You could think of trade finance as a practical implementation of the NFTs in the news today. Marco Polo is one such platform which already tokenizes payment obligations and invoices. 

Storing ownership data on blockchain reduces the costs and complications of paperwork that is otherwise required to verify the process. This is no small feat when you consider many of the processes and technologies underpinning trade finance have not been modernized in decades.

Take, for example, invoice financing. While a common activity, managing invoice payments and terms can be slow and inefficient for companies and their trading partners. They must navigate different currencies and jurisdictions, each with unique requirements in terms of contract terms and payments. 

By digitizing these manual processes and storing the data as an NFT, a technology such as blockchain has a real impact on reducing the costs, risks and delays to participants involved in trade finance. 

MAKING TRADE FINANCE MORE ACCESSIBLE TO SMEs

It is complicated and legally difficult to provide an optimal level of credit support to small companies. Nearly $1.5 trillion of demand for trade finance is rejected by banks, according to the Asian Development Bank, with 60% of banks expecting this figure to increase over the next two years. SMEs in developing markets that rely heavily on access to trade can be severely hindered through these outdated processes.

Tokenizing the payment guarantee of the final buyer can make it easier to provide this support, but there are important caveats to this. While tokenizing payment guarantees makes it cheaper and easier to execute credit support, there is no guarantee that these processes will then be used to extend supply chain financing through to the long tail of suppliers. It certainly could be used in this way, but it also might not be. This needs to be adopted at the industry level as suppliers would need to pass the NFT onto their own suppliers in turn for the tokenization of payment guarantees to truly be effective.

Although tokenizing the payment guarantee of the final buyer is a frequently mentioned use case, NFTs can also be used to digitize invoices for factoring, for example. Asset originators can tokenize invoices which can then be financed. This could be a very helpful step in enabling small companies to access the financing they need to grow trade.

EXPANDING THE TRADE ASSET ECOSYSTEM

Beyond their immediate benefits to banks and trading businesses, NFTs can also enable institutional investors to expand their activity in trade finance assets. These assets have historically struggled to scale for well-known reasons: investors find them complicated, there aren’t trusted quantitative benchmarks available and there often isn’t the necessary infrastructure to process them properly. Tokenizing trade finance receivables and payment obligations can simplify the process of asset transfer and solve one of these challenges, thus contributing to the scaling of trade finance assets.

Interest in trade finance as an asset class has grown over the past couple of years for reasons unrelated to NFTs. NFTs, as we think of them today, are relatively new and tend to be associated with digital content rather than physical goods. This framework suits trade finance assets because while they are linked to physical assets, the securities themselves are digital.

Programmable contracts used in combination with NFTs have shown great promise in tackling the problem of trade finance asset distribution. The use of the two functionalities together has promise as a way to support the building momentum around trade finance as an asset class.

OLD LEGACY SYSTEM MEETS NEW NFT BLOCK CHAIN TECH

In order to get the most out of NFTs and blockchain for trade finance–like any nascent technology–they must be used alongside existing systems. In reality, most businesses will continue to use their long-standing legacy systems throughout this transition to a fully digitized space. 

It is crucial, therefore, that disruption is kept to a minimum. NFTs and enterprise blockchain platforms should be viewed as a means of supporting and improving current processes, rather than replacing them. In other words, integration is the single most important factor in helping this industry to keep up with the rapidly digitizing world around it.   

Belly Cargo is Soaring to New Heights! What does that mean?

When consumers board an airline flight from Frankfurt to Amsterdam or Toronto to New York, they’re typically asking only these questions: “How crowded is the cabin? Does the plane have Wi-Fi? I wonder if I’ll get something to eat or drink”

Yes, they also know their bag is heading into the cargo hold, but they don’t really concern themselves with what else is being carried in that space – so called “belly cargo.”

Critical to the airlines’ flight revenues, though, belly cargo is a favorite method for businesses to ship goods from Point A to Point B in a timely and reliable manner. Pre-pandemic, in 2019, it is estimated that 47 percent of all air cargo was belly cargo – carried within the holds of regularly scheduled passenger airline flights. In turn, 53 percent was air freight, carried aboard dedicated all-cargo aircraft, called air freighters.

Belly Hold Cargo

During the height of the pandemic however, passenger flights dropped significantly or even halted totally. Now that’s reversing.  Fortunately, as airlines reintroduce more passenger flights and increase key route frequencies in 2022, our clients have more belly hold cargo options for shipping their goods.

The numbers show that belly cargo is soaring in use. During March 2022, Vienna International Airport reported strong tonnage increases for belly cargo on scheduled passenger flights – up 54 percent in January 2022 and 48 percent in February 2022, versus the same months in 2021.

Ecommerce growth is driving much global demand for belly capacity.  Certainly, shippers have much to cheer about right now with more flight options. In April 2022, United Airlines announced that it was offering the most robust summer transatlantic season in its history, an expansion with 30 new or resumed flights. So, its airline network will be 25 percent larger than in 2019.

One shift this year, though, is that many airlines are often positioning smaller aircraft on routes once served by larger aircraft; that can impact belly hold cargo capabilities. Crew shortages due to COVID-19 illnesses have also hampered some airlines in their return to service. But while it’s an evolving ‘airscape,’ shippers are generally in a better position with belly cargo options than during 2020 and 2021.

Making the Right Choices

We, Transmarine Cargo Services ship clients’ goods via truck, rail, and ocean ships, as well as within air freighters (dedicated all-cargo planes). Air freighters can transport hefty loads – everything from large machinery to building materials andagri produce like tea. In April 2022, Emirates SkyCargo reported that it had shipped more than one billion doses of Covid-19 vaccine doses globally.

Transmarine Cargo Services’ skilled employee teams of experienced logistics experts will work ‘round the clock to assist clients in handling and shipping their cargo. Onofre stresses that wise shipping decisions are made based on the client’s budget, timing, shipment consignment weight and measurements, plus the nature of products being shipped.

For example, are the goods being shipped as belly hold cargo permitted on a passenger aircraft per the International Air Transport Association’s (IATA) security regulations? And, “for belly hold cargo, can the goods secured on pallets fit within the aircraft contours,” Onofre asks? “But clients can rest easy as our experts will help them sort it all out.”

Tyre Market In Bangladesh : More Investors Needed

The demand for truck and bus radial tyres has been increasing rapidly in Bangladesh, but there is little domestic production in this segment to meet the rising demand.

The demand for tyres in Bangladesh has been increasing remarkably over a period of time due to the increase in number of vehicles both in commercial and personal space across the country. According to industry experts the demand for tyres has been increasing at an average rate of 9 per cent per annum due to the rising automobile sales, foreign investments and government support in the form of relatively lower import duties.

Though, it augurs well for local entrepreneurs in Bangladesh to grab the opportunity and ramp up their production, but the industry however has not risen up to the expectation and still remains largely dependent on imports. Currently Bangladesh imports tyres from countries like India, Japan, China, and Indonesia, as well as from a few European countries. The market size for automotive tyres in the country has now reached up to $58.90 million from $35.34 million in 2015, making it lucrative for both domestic and foreign players.

 Lacks investment and raw materials for production

Currently, only four local companies are making light automotive tyres taking advantage of the surging market. The companies including Gazi Group, Meghna Group, Rupsha Tyre, Apex Husain and a few others are manufacturing tyres for light trucks, microbuses, minibuses, motorcycles, auto-rickshaws and easy bikes. CEAT, originally an Indian brand, has agreed to set up a manufacturing plant with an investment of $4.99 million in collaboration with A K Khan Limited, a local company recently. 

The tyre manufacturing industry in Bangladesh is still lagging behind as the sector needs huge capital investments. The demand for tyre manufacturing in the country witnessed around 480,000 units annually in 2019 for heavy vehicles and private cars alone of which about 99 per cent met through imports only.

Moreover, scarcity of raw materials is another impediment for local tyre production in Bangladesh. But the situation may soon change as rubber, the main raw material used for making tyres, is currently setting a strong foothold in its production in the country. According to some reports, rubber production in the country has been growing at an average rate of 20.61 per cent per annum.

The tyre market in Bangladesh is dominated by the commercial vehicle tyre segment which takes about 80 per cent of the total demand for the product. Most of which however, is being met by non-branded Chinese tires which are often short of quality but low-cost.

Another large chunk of the Bangladesh tyre market is largely taken over by MRF Tyres, an Indian brand. There are however some private vehicles relying on more costly products like Yokohama, Dunlop and Maxxis offered by Japanese, Thai and US respectively. The Bangladesh tyre imports therefore exceed more than $11.78 million on importing more than 1.5 million tyres form different countries across the world.

Indian tyre exports on a roll

Post-Covid-pandemic exports from India increased in all segments of business and tyre exports too treading in the same growth path along with other commodities. India currently exports tyres to over 175 countries across the world. According to Ministry of Commerce and Industry’s latest statistics the country has exported $548.19 million worth of tyres in the year 2020-2021 (Apr-Nov).

According to Automotive Tyre Manufacturers Association (ATMA) healthy export growth in tyre exports has resulted in Indian tyre companies to invest more than $7 billion in the expansion of their capacities to meet the growing demand for tyres. According to ATMA tyre exports in the country in the FY21 have touched $189.39 million. The US tops the list of export destinations from India, accounting up to 17 per cent of the total export turnover. It is followed by Germany with seven per cent and Bangladesh with four per cent share.

Indian manufacturers are currently focusing on Truck & Bus Radial (TBR) tyre exports, as this segment has witnessed 30 per cent uptick in tyre exports from India recently. The exports from India to Bangladesh have increased in some commodities like rice and others in recent times.  The sudden spurt in demand for tyres in Bangladesh has helped Indian tyre manufacturers to expand their market in the neighbouring country. There are quite a few tyre manufacturers from Bangladesh who have entered into the market, but again most of them are involved in the production of tubes and tires for bicycles, rickshaws and auto-rickshaws. The demand for Truck & Bus Radial tyres has been increasing rapidly and domestically in Bangladesh there is little or no production in the sphere to meet the demand. Moreover, the increasing number of commercial vehicles and affluent consumers are also fuelling more tyre sales. Therefore, foreign players have entered into the market to fill the demand supply gaps in the Bangladesh tyre market. 

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