The months leading up to 2022 saw continued improvement for global trade – volumes grew 2% month-on-month (m-o-m) in November 2021 following a 1.1% rise the month prior, putting them back above its pre-covid trend (7.5% globally). In advanced Asian countries the trade rebound was even more pronounced, rising to 16.5% above pre-covid levels.

Trade growth is back on track

Regionally, most of that growth was concentrated in advanced economies like the UK and Japan. On the other hand, China experienced a contraction. Emerging Asia (excluding China) also saw positive growth (+1.1% m-o-m).

Global trade momentum in November 2021 was strong despite headwinds (% m-o-m growth / % pre-pandemic growth)

However, some regions still have not seen volumes peek above pre-covid levels. The UK, Africa, and the Middle East continue to lag trade levels seen in December 2019. The lasting impact of Brexit on UK trade and a relatively slow economic recovery in Africa and the Middle East are likely culprits.

While global imports were stronger drivers of the overall trade improvement in November (global imports grew 2.6%, exports 1.4%), export growth was more pronounced in advanced economies – notably Japan and the UK. Exports from China struggled as a stronger yuan started to bite and US exports weakened as a result of the surge in Omicron cases.

Export and import growth regionally (% m-o-m)

Global trade activity will, however, start to moderate in December – and potentially beyond. In November, exports from early reporting Asian countries moderated amidst rising Omicron caseloads, and many Western countries only began to revert to more stringent measures to contain the virus later that month or in early December. Real-time data – like the Kiel Trade Tracker, which tracks real-time shipping activity, would also suggest trade activity is cooling off.

Global trade will have started to moderate from December (% m-o-m)

Last year saw a relentless surge in shipping costs and persistent bottlenecks the world over, disrupting global supply chains and causing what we’ve referred to as the “World of Shortages”. Are bottlenecks set to continue? Four key factors give us some clues – and leave us optimistic.

1. Sea freight rates for container shipping on major trade routes are easing: In January this year, global ocean rates are at 8.6 times their January 2020 levels, down slightly from September 2021 peaks (10 times).

2. The average price paid for dry bulk materials is cooling off: The Baltic Dry Index, which covers more than 20 shipping routes globally, peaked at the 5,000-mark in October 2021, but has fallen sharply since (to 1,290 at the end of January), suggesting some easing.

3. Container throughput at shipping ports is rising: Container volumes at the global top 5 shipping ports further inched up in December, with the exception of the Ningbo Zhoushan port – which faced partial closure in December but will see two new berths launched this year. Container volumes at 4 other key global ports have reached well-above pre-pandemic levels.

4. Delivery times are improving: Forward-looking surveys suggest average suppliers’ delivery times began to drop in December, a tentative sign that goods and labour shortages may be starting to ease.

Much of the above would suggest supply constraints are easing. Whether these improvements suggest an easing of key bottlenecks or reflect better management by key links in global supply chains (shipping operators, port owners, and the like) is yet to be seen. But supply chains aren’t out of the woods yet. The Lunar New Year – and associated factory delays and port closures – will likely weigh on trade. And the threat of new restrictions in response to the spread of the Omicron variant (or worse, an as yet unforeseen variant) remains a key downside risk well into 2022 and reinforces the need for companies to be vigilant and prioritise supply chain resilience and agility.