march 2015 global trade trends - joc.com · global trade trends u world merchandise trade forecast...

GLOBAL TRADE TRENDSu ➢World merchandise trade forecast to grow 3.2 percent in 2015,

downgraded from 4.2 percent.

u Asia containerized exports to Europe forecast to decline 1.2 percent in 2015.

WORLD MERCHANDISE TRADE FORECAST TO GROW 3.2 PERCENT IN 2015Volume growth of world merchandise trade decelerated slightly in January to

3.2 percent from 3.5 percent on a year-over-year basis. Export momentum was solid in Japan, while import momentum declined in emerging Asia.

World merchandise trade is now forecast to grow 3.2 percent in 2015, down-graded from 4.2 percent, following growth of 3.1 percent in 2014.

GLOBAL ECONOMY TO GROW 2.9 PERCENT IN 2015 ON WEAKER OIL PRICES, STRONGER DOLLAR, MORE MONETARY STIMULUS

The strengthening dollar makes for limited damage to the U.S. economy, but makes for a lifeline to the rest of the world. This is a positive for the global economy, with IHS forecasting growth of 2.9 percent this year and 3.3 percent in 2016. Stronger exports and easing deflationary pressures are helping the eu-rozone and Japan, with a more mixed impact on emerging markets. The bottom

THE THIRD AND FINAL, for now, real GDP growth estimate for the fourth quarter came in at 2.2%, unchanged from the second reading, and marked a sharp slowdown from the third quarter’s 5.0 percent pace. There were minor changes in the components of GDP growth, but none of them were significant enough to change the gist of the economic outlook. Incoming first quarter economic data have been mixed, with manufacturing activity, business spending, and even consumer spending taking a pause while inflation is tame and employment growth continues to boom.

Despite lower gasoline prices, U.S. consumer spending barely rose in February while savings rose to the highest level in 2 years. It appears that most of the direct consumer spending benefit from lower gasoline prices has already been injected into the economy, and households are now using the windfall from lower gasoline prices to boost savings. The first quarter outlook looks now a little softer than expected, with adverse weather conditions and the severe port congestion in the West Coast act-ing as major drags. A stronger dollar and softer demand in Europe and Asia are also undercutting economic growth. Recent mixed economic data have prompted economists to downgrade their estimates for first quarter GDP. Forecasting firm Macroeconomic Advisers downgraded its estimate by two-tenths of a percentage point to a tepid 0.9 percent an-nual pace. IHS expects, nevertheless, the US economy will shrug off the adverse weather effects and grow by 3.0 percent this year, which would be the best performance in at least a decade.

Recent ocean trade data similarly revealed a soft first quarter pattern. After contracting by 9.0 percent in January, U.S. imports via ocean container rose 4.1 percent in February year-over-year according to preliminary figures from PIERS, but it was mostly due to easy year-over-year comparison. March imports are expected to be weaker as the year-over-year comparison will be much tougher, which should give us a first-quarter reading of approximately minus-3.0 percent. Going for-ward, however, imports volume are expected to improve as the backlogs at the west coast ports significantly clear, and the American consumer boosts spending again.

On exports, the trade looks very weak this year, with January export volume down 11 percent year-over-year and the US dollar strengthen-ing. As I have stated in the February report, lingering effects from the severe congestion will make for a major constraint to growth as well, amid soft global demand.

This issue of JOC Insights presents my most updated forecasts on the U.S. – South America containerized trade, and a special analysis of U.S. logs & lumber exports. In the next issue of Insights, I will report on the trans-Atlantic container trade, and more.

I hope you’ll enjoy this issue of JOC Insights.

WWW.JOC.COM THE JOURNAL OF COMMERCE

ECONOMIC TRENDS l SHIPPING TRENDS l TRADE AND COMMODITY TRENDS l PRICING TRENDS l CAPACITY TRENDS

MARCH 2015

Global Trade Trends ...........1-2The U.S. Shipping Economy ...2-3Regional Container Trade...4-5Port Traffic .........................5Intl Shipping Prices ............6Trucking ..........................6-7Rail ..................................7-8Commodity Snapshot ........8Correlations .......................9

From the desk of MARIO O. MORENO, Economist, The Journal of Commerce

2 WWW.JOC.COM JOCINSIGHTS

line is that lower oil prices, a strong U.S. dollar, and more monetary stimulus outside the U.S. will all help to strengthen global growth for the next couple of years

GLOBAL MANUFACTURING FEB-15 JAN-15 MOM DIRECTION, RATE OF CHANGE

US PMI 52.9 53.5 -0.6 GROWING, SLOWER RATENEW ORDERS 52.5 52.9 -0.4 GROWING, SLOWER RATE

INVENTORIES 52.5 51.0 1.5 GROWING, FASTER RATE

CHINA PMI 50.7 49.7 1.0 GROWING, FROM CONTRACTINGGLOBAL PMI 52.0 51.7 0.3 GROWING, FASTER RATEDATA: Institute for Supply Management; Markit; HSBC; JPMorgan

U.S. MANUFACTURING GAINS EXPECTED TO REMAIN MODEST A LITTLE LONGER

China’s manufacturing activity improved in February for the first time in four months. New orders and output expanded at faster rates, but external demand was relatively weak, with new export business sliding for the first time in 10 months. The decline could be tied to the temporary closing of factories during the Lunar New Year festivities. Employment declined again in the month.

In the U.S., manufacturing activity slowed further in February, tied to weakness in foreign demand and the work slowdown at West Coast ports. New orders grew at the slowest pace since May 2013 on weaker demand from overseas customers and domestic energy producers. Meanwhile, several purchasing managers stated the severe West Coast port congestion affected supply chains and increased costs. Manufacturing is still growing, but gains are likely to remain unexceptional a while longer while the economy digests the drag from a strong dollar, and supply chains normalize within the next two months or so.

Tracking economic data such as the ISM manufacturing index is impor-tant, because the manufacturing sector is a major source of cyclical variability in the economy, with tremendous influence over transportation and trade.

ASIA-EUROPE WESTBOUND TRADE FORECAST TO DECLINE 1.2 PERCENT IN 2015

Asia containerized exports to Europe declined 2.9 percent year-over-year in January, underlining signs of slack demand and a weaker euro. For 2015, I am anticipating a decline of 1.2 percent in the westbound lane, for an approximate total of 15.2 million TEUs. Although the eurozone economy improved modestly in the fourth quarter of 2014, it still faces significant constraints. The euro is expected to dip further.

Europe containerized exports to Asia declined year-over-year in January for the first time in three months. For 2015, the trade is forecast to modestly advance 0.7 percent as the economic momentum across key countries

in the Asia-Pacific region varies greatly. While Japan should be stronger in 2015 following near stagnation in 2014, the opposite is true in China, where a slowdown is expected to intensify in the near term.

CHINA EXPORTS TO THE EAST COAST OF SOUTH AMERICA TO RECOVER IN 2015 ON EASY YEAR-OVER-YEAR COMPARISON

China’s containerized exports to the east coast of South America in January rebounded 1.8 percent year-over-year after falling 9.6 percent in December. For 2015, I am projecting a volume increase of 6.7 percent with downside risks, after a contraction of 3.7 percent in 2014. Sluggish growth in Brazil will continue this year as it looks for ways to restore business and consumer confidence, while Argentina is struggling to avoid a full-blown economic crisis. In Venezuela, the lack of official statistical data published in the past year adds to the speculation on the severity of the economic struggles.

THE U.S. SHIPPING ECONOMY

u U.S. industrial production forecast to slow the pace in first quarter.

u U.S. exports via ocean container forecast to decline in 2015 for second straight year.

U.S. INDUSTRIAL PRODUCTION FORECAST TO SLOW THE PACE IN FIRST QUARTERU.S. industrial production edged up 0.1 percent in February after declining

0.3 percent in January, dragged by lower manufacturing and mining output. Mining saw a decline because of the collapse in oil and gas drilling, while


THE JOURNAL OF COMMERCE MARCH 2015 3

U.S. CONTAINER TRADE FEB-15 JAN-15 YOY YTD 2015(F) 2016(F)

IMPORTS 1,363 1,418 4.7% -2.8% 1.7% 12.5%EXPORTS N/A 864 -10.9% N/A -4.4% 5.6%Source: PIERS; JOC Container Shipping Outlook, March 2015 • *In Thousands of TEUs

U.S. IMPORTS ADVANCED 4.7 PERCENT IN FEBRUARY YEAR-OVER-YEARU.S. containerized imports surprised to the upside in February, rising

4.7 percent year-over-year, mostly because of some cargo rerouting activ-ity from West Coast to East Coast ports.

On a regional level, northern Europe saw the largest volume increase in the month, up 28,747 TEUs or 23 percent, followed by Northeast Asia with a gain of 24,013 TEUs or 3 percent. On the downside, most losses were seen in Southeast Asia, down 2,078 TEUs or 2 percent.

On a commodity level, the largest volume gains were seen in miscel-laneous plastic products, up 6,627 TEUs or 15 percent, followed by toys, up 5,274 TEUs or 18 percent. On the downside, losses were seen in auto tires, down 6,302 TEUs or 19 percent.

Between January and February, imports were down 2.8 percent. The December forecast for first-quarter imports called for a contraction of 3.0 percent. For 2015, I forecast total U.S. imports will expand only 1.7 percent, for a total of 19.3 million TEUs.

Overall U.S. containerized exports via ocean fell year-over-year in January for the sixth straight month, partly because of declining global demand and the severe congestion at the West Coast ports.

On a regional level, Northeast Asia saw the largest volume decline, down 112,406 TEUs or 25 percent, followed by the Mediterranean region, down 7,091 TEUs or 13 percent.

Out of the top 25 exports, most losses were seen in pet and animal feeds, down 29,951 TEUs or 56 percent; paper and paperboard, down 28,058 TEUs or 20 percent; and fabrics including raw cotton, down 8,327 TEUs or 22 percent.

For 2015, I am expecting a contraction of 4.4 percent because of a stronger dollar, subdued global demand, and the adverse effects from the West Coast ports congestion. This would mark the second straight year of losses for U.S. exports via ocean container. I am expecting the foreign exchange value of the U.S. dollar to gain approximately 10 percent on average this year over the 2014 average.

manufacturing stood unchanged as foreign trade and reduced inventory build-ing acted as drags on output. The motor vehicle sector had particularly a bad February with a 3.0 percent drop, but weakness was expected, given disrup-tions because of the West Coast port chaos. IHS forecasts industrial produc-tion will decelerate the pace to 1.3 percent in the first quarter of 2015 from 4.3 percent in the prior quarter.

Capacity utilization, a measure of slack in the industrial sector, slipped to 78.9 percent from 79.1 percent in January.

U.S. RETAIL SALES FORECAST TO EXPAND IN NEXT SIX MONTHS ON SOLID FUNDAMENTALS

U.S. retail sales fell in February for the third straight month, mostly because of winter weather effects on large parts of the country. Sales declined 0.6 percent; excluding autos and gasoline, sales declined 0.2 percent. On the upside, grocery stores posted gains as many consumers prepared ahead of the adverse weather, while non-store (online) retailers benefited as many consumers stayed indoors.

The underlying fundamentals continue to be solid: lower energy prices, solid employment reports, stronger real disposable income growth, and high consumer confidence. IHS expects consumers to increase spending in March, and much of the lost sales in February should be made up then. Retail sales, adjusted for inflation, are forecast to increase 2.2 and 2.0 percent in March and April, respectively, year-over-year.

The retail inventory-to-sales ratio rose to 1.44 in January from December’s 1.43 ratio, and stood below the 1.45 ratio of January 2014.

U.S. HOUSING MARKET

FEB-14 MOM YOY YTD 2016(F)

EXISTING HOME SALES 4,880 1.2% 4.7% 8.4% 7.2%NEW HOME SALES 539 4.4% 9.4% 13.7% 24.3%HOUSING STARTS 897 0.0% 20.5% 18.1% 14.5%Source: US Department of Commerce; NAR; IHS Forecast • *In Thousands of Units, Seasonally Adjusted Annual Rate

EXISTING HOME SALES FORECAST TO REBOUND 8.4 PERCENT IN 2015Existing home sales were up only 1.2 percent in February, to a 4.88

million-unit annual rate, likely because of tight inventory and strong price growth. It is likely existing home sales will be down for the quarter, but IHS expects sales to pick up over the course of the year, mainly because higher home prices and steady job gains will boost listings.

Housing starts tumbled 17.0 percent in February, to an 897,000 annual rate, likely because of the weather being unusually cold and wet. Building permits only advanced 3.0 percent, but employment data suggest builders still plan to boost inventory in the near future. As the spring season selling begins, housing starts should rebound a bit in March, with positive implica-tions on imports of key housing inputs.


EXPORTS TO SOUTH AMERICA

EXPORTS, JANUARY 2015

TRADE LANE TEUS MOM YOY YTD 2015(F) 2016(F)

EC SOUTH AMERICA 36,043 -9.1% -6.2% -6.2% -2.4% 10.0%WC SOUTH AMERICA 35,666 -7.6% -1.6% -1.6% -6.0% 2.4%Source: JOC Container Shipping Outlook March 2015

Southbound shipments to the east coast of South America declined in January year-over-year for the 14th consecutive month. Paper and paper-board, industrial resins and miscellaneous plastic products led the losses. For 2015, I am expecting a contraction of 2.4 percent in the trade because of unfavorable exchange rates and subdued demand from Brazil. For 2016, the trade should recover by 10.0 percent.

Southbound shipments to the west coast of South America fell in January year-over-year for the third straight month. Most losses were seen in fabrics, including raw cotton, industrial resins and miscellaneous plastic products. For 2015, I am expecting a contraction of 6.0 percent because of unfavor-able exchange rates and weak demand. For 2016, the trade should partially rebound 2.4 percent.

REGIONAL CONTAINER TRADEu U.S. imports from the west coast of South America forecast to grow 3.8

percent in 2015.

u U.S. exports to the east coast of South America forecast to decline 2.4 percent in 2015.

IMPORTS FROM SOUTH AMERICA

IMPORTS, FEBRUARY 2015

TRADE LANE TEUS MOM YOY YTD 2015(F) 2016(F)

EC SOUTH AMERICA 25,429 -13.4% 8.1% 7.9% 3.4% 12.3%WC SOUTH AMERICA 40,212 -1.1% 15.5% 9.8% 3.8% 14.8%Source: JOC Container Shipping Outlook March 2015

Inbound trade from the east coast of South America jumped 8.1 percent year-over-year in February after rising 7.6 and 16.3 percent, respectively, in the prior two months. Gains were mostly seen in logs and lumber, woodenware and auto parts. For 2015, I am expecting growth of 3.4 percent as a stronger dollar and solid demand for housing inputs and auto parts boost the trade.

Inbound trade from the west coast of South America jumped 15.5 percent year-over-year in February after rising 4.8 and 5.8 percent, respectively, in the prior two months. Gains were mostly seen in veneers and plywood, cocoa beans, and logs and lumber. For 2015, I am expecting growth of 3.8 percent, mostly because of favorable exchange rates and solid demand for construction inputs.



PORT TRAFFICu ➢Container volume handled by West Coast ports declined sharply in

January, as expected.

u Container traffic at Shenzhen jumped 43.9 percent year-over-year in February.

In January, the top 10 U.S. ports handled 84.0 percent of the total U.S. international container traffic, down from 85.8 percent in January 2014.

As expected, container volume declined sharply in the West Coast ports on severe congestion, and February figures are expected to be disappointing as well. East Coast ports are gaining market share, with the Port of New York and New Jersey taking second place in the U.S. rankings, topping Long Beach in third place.

International container traffic at the Port of Seattle expanded 5.2 percent in the month, following a 3.5 percent year-over-year increase in December.

Container traffic at the Port of Shanghai grew 16.7 percent year-over-year in February, after increasing 7.2 percent in January. Meanwhile, traffic at the Port of Shenzhen jumped 43.9 percent year-over-year in February after sliding 0.2 percent in January.

BRAZILIAN ECONOMY FORECAST TO CONTRACT IN 2015 FOR SECOND STRAIGHT YEAR

The Brazilian economy, which deeply influences the regional aver-age, is falling into recession again. The outlook for Brazil’s economy is not very encouraging. For growth to resume, business and consumer confidence must be restored. IHS calls for Brazilian GDP to contract 0.5 percent in 2015 before accelerating to 1.0 to 1.3 percent in 2016.

The recession in Argentina and Venezuela will continue, while Chile, Peru and Colombia will see modest to moderate growth. Lower oil prices are good news for Chile and Uruguay, but not for oil exporters Ecuador, Colombia and Venezuela. Peru and Brazil are net importers and will benefit slightly from the lower cost of fuel imports.

TOP COMMODITIES: SOUTH AMERICATOP U.S. IMPORTS FROM SOUTH AMERICA, IN TEUS: FEBRUARY 2015

RANK COMMODITIES TEUS MOM YOY YTD

1 BANANAS 8,654 -2% -5% -1%2 FRUITS,MISC 6,015 -3% 2% 7%3 LOGS&LUMBER 3,463 3% 58% 30%4 COFFEE 3,033 7% 22% 23%5 VENEERS&PLYWOOD 2,236 -5% 52% 61%6 STILL WINES 1,798 7% 22% -12%7 AUTO&TRUCK TIRE&TUBES 1,784 11% -7% -6%8 COCOA BEANS&PRODS 1,605 39% 344% 235%9 WOODENWARE,MISC. 1,561 -15% 77% 48%10 PAPER&PAPERBOARD W/WASTE 1,494 8% -6% -31%Source: PIERS

TOP U.S. EXPORTS TO SOUTH AMERICA, IN TEUS: JANUARY 2015RANK COMMODITIES TEUS MOM YOY YTD

1 PAPER&PAPERBOARD W/WASTE 5,566 8% -22% -22%2 AUTO PARTS 3,631 31% 24% 24%3 WOOD PULP 2,808 13% 26% 26%4 VINYL ALCOHOL,PVC RESINS 2,593 -8% -2% -2%5 PLASTIC PRODS, MISC 2,397 -8% -10% -10%6 SYNTHETIC RESINS,NSPF 2,242 -18% -13% -13%7 PE,MELAMINE,UREA RESINS 1,738 46% -5% -5%8 PETROLEUM/CRUDE&FUEL OIL 1,616 -1% 16% 16%9 GROCERY PRODS,MISC. 1,455 -22% -4% -4%10 FABRICS,INCL.RAW COTTON 1,306 14% -41% -41%10 FABRICS,INCL.RAW COTTON 1,306 14% -41% -41%Source: PIERS

CURRENT YOY RANK NAME OF PORT MONTH CHANGE (%) 2014 2015 (F) 2016 (F)

1 LOS ANGELES2 NEW YORK3 LONG BEACH4 SAVANNAH5 VIRGINIA PRTS6 HOUSTON7 CHARLESTON8 OAKLAND9 TACOMA10 SEATTLE

340 -31.4% 340 5,856 6,469 336 3.0% 336 4,291 4,756 334 -26.2% 334 4,871 5,368 226 8.9% 226 2,580 2,832 154 7.7% 154 1,925 2,109 142 8.3% 142 1,601 1,755 120 13.8% 120 1,415 1,549 87 -34.1% 87 1,575 1,715 84 -21.7% 84 1,316 1,440 72 5.2% 72 770 841

TOP 10 CONTAINER THROUGHPUTS OF U.S. MAJOR PORTS In January 2015 Unit: 1000 TEU

Source: PIERS; JOC Port Forecast March 2015. Figures are rounded. Data represents fully-loaded container figures, and is refreshed frequently.

CURRENT YOY RANK NAME OF PORT MONTH CHANGE (%) YTD

1 SHANGHAI (上海) 2 SHENZHEN (深圳)3 NINGPO ZHOUSHAN (宁波－舟山)4 QINGDAO (青岛)5 GUANGZHOU (广州)6 TIANJIN (天津)7 DALIAN (大连)8 XIAMEN (厦门) 9 LIANYUNGANG (连云港)10 SUZHOU (苏州)

2,574 16.7% 5,737 1,856 43.9% 4,033 1,532 22.2% 3,442 1,240 5.5% 2,732 961 2.4% 2,447 1,016 5.2% 2,100 645 1.7% 1,395 560 8.2% 1,274 394 -3.5% 861 318 9.2% 702

TOP 10 CONTAINER THROUGHPUTS OF CHINA’S MAJOR PORTS In February 2015 Unit: 1000 TEU

Source: Shanghai Shipping Exchange. Data represents fully-loaded and empty containers


TRUCKINGu Trucking freight volume declined year-over-year in February for the

second straight month.

u Value of U.S. exports to Canada via truck forecast to expand 4.2 percent in 2015.

FREIGHT INDEX DOWN 37 PERCENT YEAR-OVER-YEAR IN FEBRUARYSpot market freight availability declined for a second consecutive month

in February, a seasonal pattern that mimics the first quarter of 2013, but at higher volume. Month-to-month freight volume dipped 6.0 percent, accord-ing to the DAT North American Freight Index. Compared to the extreme demand created by the Polar Vortex in February 2014, however, volume was 37 percent lower.

LOAD-TO-TRUCK RATIO FOR VANS AT 2.6, DOWN FROM JANUARY’S 2.8Van rates declined 3 cents, or 1.9 percent, on the spot market in Febru-

ary compared to January. Rates are derived from DAT RateViewTM and do not include fuel surcharges. The average surcharge dropped 2 cents, or 6.5 percent, to 29 cents per mile. The combination yielded a 5-cent, or 2.6 percent, decline in the total rate, from $1.93 in January to $1.88 per mile in February, including fuel.

Freight volume declined 6.1 percent for vans, month-to-month, and ca-pacity added 0.5 percent on the company’s DAT Load Boards in February, dropping the national average load-to-truck ratio for vans by 6.6 percent. The ratio declined to 2.6 loads per truck, from 2.8 in January.

On a year-over-year basis, van spot market line-haul rates rose 9 cents, or 6 percent, compared to February 2014, partly offsetting a 19-cent, or 40

INTERNATIONAL SHIPPING PRICESu ➢Slow season exerting negative influence on spot rates across major

east-west trades.

u Asia-Europe freight rates down for eight straight weeks.

SHANGHAI-U.S. SERVICE INDECES ON DOWNWARD TRENDIn the week ending March 27, the freight rate for the voyages from Shanghai

to base ports on the U.S. West Coast declined 2.7 percent, or $47, and followed 4 straight weekly declines.

Similarly, rates from Shanghai to U.S. East Coast ports fell 3.2 percent, or $140, in the week ending March 27, following 4 straight weekly declines, but were still 28.2 percent higher year-over-year. The East Coast ports have been benefiting from cargo diverted from the West Coast as shippers try to avoid backlogs. The Asia-U.S. East Coast spot rate is now $834 per FEU lower than it was on Feb. 13, the last time the rate increased.

SHANGHAI-EUROPE RATES CONTINUE ON DOWNWARD TRENDSpot rates on in the Asia-to-North Europe trade continued to take a beating

from weak demand and excess capacity, falling to a record low of $586 per 20-foot container. An indication of the carriers’ weak pricing power is evidenced when comparing the rate with the same week last year, which was 34 percent lower. Carriers in the Asia-Europe trade are preparing to levy April 1 general rate increases.



The average revenue per intermodal load fell 3.2 percent year over-year in February, after seeing no growth in January. From January to February, the average revenue fell 1.5 percent, or $40.

VALUE OF U.S. IMPORTS FROM CANADA VIA RAIL CLOSED 2014 IN CONTRACTION

U.S. exports to Canada by value via rail through December advanced year-over-year in eight of the last nine months, and closed the year up 2.5 percent as Canada’s economy ended 2014 with a strong quarter. For 2015, I am expecting export growth between 12 and 14 percent.

U.S. imports from Canada by value via rail fell 8.5 percent year-over-year in December, and closed the year down 2.9 percent. For 2015, I am expecting imports growth of approximately 10 percent.

RAIL CONTAINER SHIPMENTS DECLINED IN FEBRUARY FOR FIRST TIME IN 25 MONTHS

U.S. ocean container trade tumbled 9.7 percent year-over-year in January linked to the severe congestion at the West Coast ports. Rail container shipments declined 7.4 percent year-over-year in February, possibly tied to adverse weather and the West Coast port congestion, while rail carloads declined 1.1 percent. Rail container shipments regis-tered the first year-over-year contraction in 25 months.

percent, decline in the fuel surcharge. The total rate declined 10 cents, or 5.1 percent, from $1.98 to $1.88 per mile, including both the line-haul and the fuel surcharge.

U.S. EXPORTS TO CANADA VIA TRUCK FORECAST TO GROW 4.2 PERCENT IN 2015U.S. exports to Canada via truck rose 6.3 percent year-over-year in

December after falling 2.6 percent in the prior month. Exports to the U.S. northern neighbor rebounded in the second half of 2014 and closed the year up 0.7 percent thanks to improving economic activity in the Cana-dian market. For 2015, I am expecting growth of 4.2 percent

U.S. imports from Canada via truck increased year-over-year in De-cember for the 11th straight month as U.S. economic activity continued to improve. Imports from the northern neighbor accelerated in the second half of 2014 and closed the year up 6.2 percent. For 2015, I am expecting the upward trend to continue, and the trade should close the year up around 7 percent.

RAILu U.S. rail imports from Canada by value forecast to rebound in 2015.

u U.S. rail transportation of metals down in February for first time in nine months.

AVERAGE REVENUE PER HIGHWAY LOAD DECLINED FOR FIRST TIME IN 15 MONTHSThe average revenue per highway load in February declined 1.0

percent year-over-year to $1,552, likely linked to the West Coast labor dispute. From January to February, the average revenue declined 4.3 percent, or $70.


RAIL TRANSPORTATION OF METALS DOWN FOR FIRST TIME IN NINE MONTHS U.S. rail transportation of chemicals grew 2.0 percent year-over-year

in February, totaling 123,484 carloads, and marking three consecutive months of expansion.

U.S. lumber and wood products expanded 9.1 percent year-over-year in February, while housing starts tumbled 17.0 percent year-over-year (see page 3).

Rail transportation of metallic ores and metals declined 3.6 percent year-over-year in February, following nine consecutive monthly gains. COMMODITY SNAPSHOT u U.S. logs and lumber exports via ocean container forecast to decline

12.0 percent in 2015 on weaker demand, stronger dollar..

u Indian demand for logs and lumber sharply rising.

U.S. LOGS AND LUMBER EXPORTS

U.S. CONTAINERIZED EXPORTS OF LOGS AND LUMBER EXPECTED TO DECLINE IN 2015

U.S. exports of logs and lumber via ocean container declined in Janu-ary for the fourth consecutive month, year-over-year, partly because of falling demand from China and unfavorable exchange rates. The trade outlook for 2015 looks negative as shown on the chart above with export volume expected to decline 12 percent following a 9 percent increase in 2014. The housing market restriction measures undertaken by the Chi-nese government have markedly cooled down the housing market this year. Housing sales declined 7.6 percent in 2014, partly due to high base

effects. Some local governments have begun to relax restrictions on hous-ing purchases, but the impact has been limited so far. It appears the hous-ing market downturn, combined with overall weakness in the economy, will likely weaken housing construction this year, effectively dampening demand for logs and lumber, and other construction inputs.

INDIA IS NOW THIRD-LARGEST EXPORT MARKET FOR LOGS AND LUMBERAs measured by ocean container volume, China is the largest export market

for U.S. logs and lumber, holding 54.9 percent of the market in 2014, up remark-ably by 12 percentage points from 2012. Despite the weaker demand from China in the second half of 2014, U.S. exports of logs and lumber managed to expand 17 percent in all of 2014, following a jump of 36 percent in 2013. Exports to Vietnam and Japan declined 1 and 25 percent in 2014, respectively, while exports to India jumped 80 percent.

India’s strengthening construction sector has had positive implications over its demand for logs and lumber. The Indian market moved up from sixth place in 2013 to the third place in 2014 in the U.S. export market share for logs & lumber.

PORTS OF NORFOLK, SAVANNAH AND TACOMA HANDLED MOST INTERNATIONAL OUTBOUND TRAFFIC OF LOGS AND LUMBER IN 2014

In 2014, the ports of Norfolk, Savannah and Tacoma each handled 14 percent of the total TEU volume of U.S. logs and lumber exports. The Port of Norfolk had handled 18 percent of all exports in 2013. The Port of Charleston handled 10 percent of all the outbound traffic last year, up 3 percentage points from 2013.

U.S. exports of logs and lumber via ocean container totaled 440,902 TEUs in 2014.

SHARE OF U.S. LOGS & LUMBER EXPORTS AND ANNUAL GROWTH RATES (TEU VOLUME)

SHARE OF EXPORTS ANNUAL GROWTH RATES

2012 2013 2014 2012 2013 2014

CHINA 0.427 0.507 0.549 -6% 36% 17%VIETNAM 0.074 0.072 0.066 53% 13% -1%INDIA 0.021 0.026 0.042 27% 40% 80%JAPAN 0.068 0.058 0.040 -3% -2% -25%TAIWAN 0.045 0.045 0.039 17% 16% -5%KOREA 0.058 0.042 0.035 -24% -17% -9%HG KONG 0.023 0.028 0.023 -47% 38% -11%ITALY 0.030 0.023 0.020 -26% -11% -7%U. KINGDOM 0.021 0.016 0.016 5% -13% 9%AUSTRALIA 0.016 0.013 0.012 22% -9% 1%SOURCE: PIERS; author’s own calculations



INVERSE LINEAR RELATIONSHIP BETWEEN U.S. LOGS AND LUMBER EXPORTS AND THE U.S. DOLLARForeign demand for U.S. logs and lumber weakened in the second half of 2014, partly because of housing market downturns in key export markets,

but also unfavorable exchange rates.From the first quarter of 2000 to the fourth quarter of 2014, the correlation between value of U.S. logs and lumber exports via ocean container and

the foreign exchange value of the U.S. dollar was measured at minus-60 percent. This negative correlation coefficient suggests then that logs and lum-ber exports losses tend to be associated with gains in the value of the U.S. dollar. Logs and lumber exports slowed the pace to 8.6 percent in 2014 from 15.0 percent in 2013, while the dollar strengthened in average value to 3.0 percent in 2014 from 2.4 percent in 2013.

Because the dollar is expected to increase approximately 10 percent on average this year over its average value of 2013, one could argue that logs and lumber exports will tend to decline this year as well.

CORRELATIONS

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