GLOBAL MACRO: Sharply Higher June Shipping Rates Suggest Stronger Trade Growth
Jun-11 02:07
Container rates are consistent with a trade recovery over Q2 following the delay of US tariffs to early July, as also signalled by Bloomberg ship tracking data. Rates are significantly higher over May/June. Increased sailings since end-May have increased vessel demand and thus costs. Trade talks with the US are ongoing and will determine if rates rise further but inventory build ahead of tariff deadlines may drive a reduction in global trade in H2 anyway.
- The recent rise in bulk and container rates suggests that global trade growth (CPB) could trend higher towards mid-year after picking up to 6.6% y/y in March from 3.0% y/y in December.
Global trade growth vs Baltic Freight Index
Source: MNI - Market News/LSEG
- The FBX global container index was up almost 60% on June 10 from 31 May with China/East Asia to North American east coast up 78%, to the Mediterranean +43% and Baltic Freight Index (BFI) +18.5%.
FBX container rates USD/points
Source: MNI - Market News/LSEG
- The month average FBX global rate fell sharply in the three months to April but then rose 4.7% m/m in May and is +69% m/m in June to date reaching its highest level since January. This increase is likely to reflect both optimism of a trade deals being reached plus further frontloading of exports in case they fail. But the FBX index is still down 15.2% y/y in June after -32% y/y.
- The China/East Asia to North American east coast route began to rise in April and the June average is up 85% m/m but still down 11.4% y/y but has reached its highest since September 2024.
- Bulk commodities have also seen an increase in shipping prices but less than containers. The BFI June average is up 22% m/m after falling in April and May and is still down 14.6% y/y but after 28.8% y/y.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
USD: Testing Resistance At 1230
May-12 01:44
The BBDXY range overnight was 1225.03 - 1229.53, Asia is trading around 1229. The USD opens slightly higher on US-China officials citing 'substantial progress' made from weekend trade talks held in Switzerland.
- Eurizon SLJ a small FX-focused hedge fund, made comments regarding the recent move in USD/ASIA last week. FT Alphaville expanded on their note to investors. https://www.ft.com/content/03f6831d-d4f3-42f8-99f4-d40daa25cd5d
- “ We continue to believe the risk of investors being blindsided by such a non-linear sell-off in the dollar continue to rise. The sharp sell-off in USDTWD last week is such an example. There will be others, we predict.”
- “We have long warned about the ‘Avalanche’ risk for the dollar. There could be USD2.5 trillion worth of ‘snow’ in China and more from the likes of Taiwan, Malaysia, and Korea, rising at a pace of USD500 billion a year — we conservatively guesstimate. Only a modest proportion of the very large trade surpluses these countries have earned have been repatriated back home, with the bulk of the export earnings being hoarded by exporters in USD deposits. Corrections in USDAsia could pacify the US, as Asia accounts for more than half of all US trade deficit, making this a fundamentally benign development, except for those caught long dollars.”
- “The overhang of liquid dollar holdings is just too large if the dollar weakens, the Fed cuts interest rates, and China stages a cyclical rebound. In other words, both the push and pull factors that kept the export earnings in dollars outside the home countries in the past years will potentially flip signs in the coming quarters. At the same time, many of those holding long-dollar exposures know very well that the dollar is over-valued.”
- Taiwan has now enjoyed US$4bn of inflows in six successive trading days. Taiwan: Had inflows of +$645m as of the 9th, with total inflows of +$2,744m over the past 5 days. YTD flows are negative at -$14,471.
- Resistance in the BBDXY around 1230 is currently being challenged, the market has failed here previously but this move does feel as if it has more to do. A move back through here will target the longer term resistance towards 1250.
- Data : US CPI Tomorrow
Fig 1: BBG Asia/USD Daily Chart
Source: MNI - Market News/Bloomberg
MNI: CHINA PBOC CONDUCTS CNY43 BLN VIA 7-DAY REVERSE REPO MON
May-12 01:25
- CHINA PBOC CONDUCTS CNY43 BLN VIA 7-DAY REVERSE REPO MON
CNH: USD/CNY Fixing Edges Down But Remains Within Recent Ranges
May-12 01:24
The USD/CNY fix printed at 7.2066, versus a BBG market consensus of 7.2441.
- Today's fixing is down from Friday's outcome of 7.2095, but we remain within recent ranges. The recent low for the fixing coming in at 7.2005.
- The fixing error was little changed at -375pips.
- USD/CNH spot was last near 7.2250, up around 0.20% versus end NY levels from Friday. We haven't been able to test sub 7.2200 meaningfully yet. The pair gapped lower at the open on constructive trade talk headlines, but for now the markets await more details.
