Monday, February 9, 2009

Slump in Asian trade may drag into 2011

THE slump in Asian trade could last into 2011, putting more shipping lines out of business and potentially aggravated by signs of rising protectionism, the Hong Kong Shippers’ Council said last Friday.

Sunny Ho, executive director of the council, which represents exporters, importers and other shipping users, expressed shock at the pace of the meltdown in Asian trade in the past two months as shipments from major ports have skidded at double-digit rates.

“It’s the worst we’ve seen in the past 20 years. I’m particularly pessimistic. I think we’ll see a very sharp decline in Asian exports this year and negative growth in 2010. We might see some mild growth in 2011 but not back to levels we’ve seen over the past few years,” said Ho.

In Hong Kong, Shanghai, Singapore and other Asian ports, ships are now lying idle and loaded with empty containers as shipping lines use them as floating storage depots rather than pay to keep the containers in a depot.

Ho said investor expectations of a recovery in Chinese demand for raw materials, which has spurred a 30% surge in the Baltic Dry Index, a measure of freight prices in the past two days, was premature.

“The Chinese recovery will be shortlived. Prices of raw materials have come down so much that China has started buying again. But, unless there is growth in demand for consumer products, then demand for these raw materials will not be sustainable,” he said.

Ho is much more bearish than economists who forecast Asian trade will pick up in 2010 as global fiscal stimulus takes effect.

Container throughput from Hong Kong suddenly slumped 19% in the final two months of last year while throughput via the Shenzhen port in southern China fell 11% as recession in the United States and Europe depressed demand for Chinese goods.

China’s economic slowdown means growth in Chinese consumption would not be strong enough to pick up the slack in global demand, although a massive fiscal stimulus by the government would help, Ho said.

Over-leveraged US consumers, meanwhile, would have to save for the next few years and the US downturn was already giving rise to protectionism, he said.

Last month, the US further tightened documentary and inspection requirements for US imports of toys and other goods containing lead.

Ho saw a proposed “Buy American” clause in President Barack Obama’s stimulus package as another ominous sign.

“We are concerned that more protectionism will come. This makes it very costly for manufacturers,” he said.

Weak sales in Western markets left Asian manufacturers with a rising risk of order cancellations and demands to prolong payment times from retailers and other customers whose finances are stretched, Ho said. That makes some manufacturers reluctant to accept orders. - Reuters

Source: Star Online

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