So far this year, global trade has bounced back faster and stronger than expected, especially in value terms (+8.6% q/q in Q1 2021 vs. +3.4% q/q in volume terms), driven by price and capacity pressures. Despite peaking in 2021, these are likely to continue in 2022 as lower tariff rates won’t make up for a slow normalization and structural changes in trade flows. While global supply and demand explained most of the yearly contraction in trade in 2020, they account for only c.15% of the average y/y growth of global trade in value since the beginning of this year. Instead, input restocking explains c.50% of the rise. More specifically, US and European companies are managing their inventories to respond to a strong rebound in local demand, which is dependent on inputs and goods manufactured and shipped out of Asia.

The global race for inputs is supporting trade volumes and, more importantly, pushing prices up. The race leads to the just-in-case model of inventories management being more widely adopted, which can lead to a form of micro speculation in which companies rush to acquire inputs, to protect against further price increases. Such a strategy adds further pressure to the ongoing global supply-demand imbalance, caused by renewed Covid-19 restrictions and power shortages in Asia-Pacific alongside accelerating demand from the grand reopening  in the US and Europe. The result is that trade volumes are sustained, and prices keep accelerating.

Shipping constraints  explain another c.35% of the rise in trade flow value this year. Vessels are currently being used at almost full capacity and available containers remain scarce. After continuously rising in the second half of 2020, there are signs that maritime shipping delays are plateauing, but overall performance remains the worst it has been in ten years of records (the share of vessels not arriving on time has remained around 60-65% since the beginning of the year vs. 25% in July 2020 and c.20% on average in 2019). Importers are thus probably willing to pay more for their orders to be transported. Indeed, the traffic volume from Asia to North America is rising sharply, denoting strong demand, while freight rates increased earlier and faster for shipping from Asia to Europe. North America is thus capturing available containers out of Asia, while Europe has been forced earlier on to pay higher prices to access shipping capacity. 

Against this backdrop, trade flows in value terms will continue to overshoot: We expect global trade to grow by +7.7% in volume terms in 2021 (vs. -8.0% in 2020) and by a much higher rate of +15.9% in value terms (vs. -9.9% in 2020), with even an upside risk to this forecast. Sequential growth could prove to be more bumpy, with Q2 in particular under pressure (in part due to temporarily softer activity in Asia), followed by a mild rebound in Q3. The large gap between the volume and value yearly numbers reflects the recovery but in particular price pressures caused by input and container shortages. Strong demand for shipping capacity coming from Asia is set to continue as US retailers currently face an exceptionally low level of inventories . The shipping industry is unlikely to normalize in the short-term (2021-2022), due to a number of reasons: 1/ the continued uneven recovery around the world, 2/ underinvestment over the past few years in the maritime shipping industry, 3/ new capacity only slowly becoming operational (probably not before 2023 as it takes one and a half years to build a new vessel) and 4/ few alternatives to ocean freight .