the economy and logistics through the lens of data · analysis and committee for a responsible...

The Economy and Logistics Through the Lens of Data

The State of Trade:

2

The contents of this webinar are made available for informational purposes only and should not be relied

upon for any legal, business, or financial decisions. We do not guarantee, represent or warrant any of the

contents of this webinar because they are based on our current beliefs, expectations and assumptions,

about which there can be no assurance due to various anticipated and unanticipated events that may occur.

This webinar has been prepared to the best of our knowledge and research, however the information

presented herein may not reflect the most current regulatory or industry developments. Neither Flexport nor

its advisors or affiliates shall be liable for any losses that arise in any way due to the reliance on the contents

contained in this report.

The State of Trade: The Economy and Logistics Through the Lens of Data

3 The State of Trade: The Economy and Logistics Through the Lens of Data

Phil LevyChief Economist,

Flexport

Today's Speakers

Sanne MandersCOO,

Flexport

Nerijus PoskusVP and Global Head of Ocean Freight,

Flexport

■ The Supply Shock in China

The initial economic interruptions of Covid-19

■ Industry Data – Supply and Demand

Air turbulence and choppy ocean sailings

■ Broader Economic Indicators

National and international measures of an oncoming shock

■ Policy Responses

Monetary and fiscal measures

■ What to Watch

4The State of Trade: The Economy and Logistics Through the Lens of Data

Lens of Data - Different Focal Lengths

5

The Supply Shock in China.


6

China’s Recovery

0

250

500

750

1000

CNY-3 CNY-2 CNY-1 CNY CNY+1 CNY+2 CNY+3 CNY+4 CNY+5 CNY+6 CNY+7 CNY+8

2018 Departed Units

2019 Departed Units

2020 Departed Units

Flexport Shipments from China to All Destinations around Chinese New Year


The chart is based on Flexport data

7

China’s Recovery –Differentiating Between Supply and Demand Shocks

4

3

2

1

0-3 -2 -1 0 1 2 3 4 5 6 7 8 9

2019

2020

Actual Cargo Ready Date (CRD) Week Relative to CN (Anchored to January 1)

Initia

l to

Actu

al D

ela

y (

Da

ys)



8 The State of Trade: 3 Trends to Expect in 2020.

n=397

Shipper readiness on production capacity

90% - 100% Full Speed

70% - 80%-Mostly Resumed

50%-60%-Half Resumed

20%-30%-Slowly Ramp-up

0%-Not Ready At All

0 20 40 60 80

Q2 PO cancellations(volume)

FlexportShipper Survey (March, n=397)

Current Estimate

24%

30%

Greater China Shipper Survey by Flexport*

Supply shock is over (for now), but shippers do forecast demand shock

*Based on a Flexport survey of 397 China shippers in March 2020

9

Industry Data –Supply and Demand.


■ Shippers have less choices

20-30%+ of capacity has been removed from all major trade lanes

■ Carriers no longer have direct service for all major portsTransit times between direct and indirect services can vary over 50%

■ Demand for Premium services is unprecedented (incl. LCL)Bookings for “Fast Boat” from Shanghai to Los Angeles are +500%

■ Service inconsistency is the new normOnly 20 out of 51 Transpacific services don’t have blank sailings

■ Carriers are unable to control empty equipment flows Equipment availability will be an issue in 2020/2021


Ocean Freight - a lot of moving pieces


Capacity Reductions Across Trade LanesVessel deployment data for weeks 16th through 19th compared to March 2019

Source: Ocean Carriers announcements. Data in TEU’s. FEWB - Asia to North Europe, TPEB - Asia to North America, TAWB - North Europe to North america

12

Blank Sailings - Carriers are Quick to Adapt

Shipping Line Capacity - Transpacific


100%

95%

90%

85%

80%

75%

70%Week of April 13 Week of April 20 Week of April 27 Week of May 4

April 1 Forecast

April 2 Forecast

April 3 Forecast

April 7 Forecast

April 9 Forecast

Source: Ocean Carriers announcements.

13

Air Freight Prices have Tripled and the Spot Market even Quadrupled


Source: TAC Index

Jul 2016 Jan 2017 Jul 2017 Jan 2018 Jul 2018 Jal 2019 Jul 2019 Jan 2020

Week from Monday, Apr 1, 2019

NAP HAWB: 2.71

14

Driven by a Supply Shock

Only 20% of Passenger Widebody Still Flying, Freighters Making Overhours


Source : Seabury Global Capacity Update, April 3rd 2020

15

This Helps, a Bit, to Relief PPE Rush


16

Secondary Lanes Even More Impacted


Source : Seabury Global Capacity Update, April 3rd 2020

17

Broader Economic Indicators.


18

Unemployment Claims


Source: US Bureau of Labor Statistics

April May June July August September October November December January February March April

0

1

2

3

4

5

6

7

8

Seasonally Adjusted Initial Claims - April 6, 2019 - April 4, 2020

Mill

ions

Moving Average

Weekly IC

19

U.S. Manufacturing Output


Source: Federal Reserve Board of Governors

20

U.S. Retail Sales


Source: Census

21

Oil Prices - West Texas Intermediate (WTI)


Source: MarketsInsider

February March April2020

60

55

50

45

40

35

30

25

20

0%

-10%

-20%

-30%

-40%

-50%

-60%-62.73%

22

Global Trade Data and Projections


Source: World Trade Organization

140

130

120

110

100

90

80

70

60

50

40

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

Index, 2015=100

World Merchandise Trade Volume, 2000 - 2022

Merchandise trade

Optimistic scenario

Pessimistic scenario

Trend 1990-2008

Trend 2011-2018


n=519 Source: Flexport Webinar Poll, April 8, 2020

3.5%

How much do you think your sales will be impacted in Q2?

Grim Outlook for Q2

Increase by more than 30%

Increase by 21-30%

Increase by 11-20%

Increase by 6-10%

Increase by <5%

Decrease by <5%

Decrease by 6-10%

Decrease by 11-20%

Decrease by 21-30%

Decrease by more than 30%

3.1%

5.8%

5.6%

5.0%

6.0%

11.9%

17.1%

16.2%

25.8%


n=501 Source: Flexport Webinar Poll, April 8, 2020

How much do you think your sales will be impacted for

full 2020 annual revenue?

Less Pessimism for FY2020

Increase by >50%

Increase by 40-50%

Increase by 30-40%

Increase by 20-30%

Increase by 10-20%

Increase by <10%

Decrease by <10%

Decrease by 10-20%

Decrease by 20-30%

Decrease by 30-40%

Decrease by 40-50%

Decrease by >50%

1.2%

0.4%

0.8%

5.2%

8.8%

9.6%

14.8%

23.6%

18.8%

10.0%

4.2%

2.8%

25

Policy Responses.


26

Federal Reserve Balance Sheet ($trillions)


Source: Federal Reserve Board of Governors

6M

5M

4M

3M

2M

1M

02008 2010 2012 2014 2016 2018 2020

July 30, 2007 - April 8, 2020

27

Fiscal Response - CARES Act


Source: Bureau of Economic

Analysis and Committee for a

Responsible Federal Budget

$2.3 $2.3

$3.1

$1.4

$2.5

$3.7

$4.5

2020 CARES Act Personal Goods

Consumption

Private Domestic

Investment

U.S. Exports U.S. Imports Federal

Government

State & Local

Government

28

Trade Policy



2016 2017 2018 2019 2020

2

4

6

8

10

12

14

Tariffs on Imports from China Over

Time

Tariff

% o

f pro

duct valu

e

29

What’s Next,andWhat to Watch.


30

A Grim Global Growth Outlook - Look Out for Recovery Shape


Source: International Monetary

Fund, World Economic

Outlook, April 2020

United States Euro Area Japan China Latin America

4.5 4.7

9.2

3.0

1.2

5.1

3.4

-6.1

-0.9

-7.5

-1.6

-5.2

-1.2

-5.2

-1.0

2020

2021

Average

IMF WEO GDP Growth Projections (%)

1. Heavy Truck Sales (Class 8 Tractor)

2. Trade Credit

3. Bankruptcies, specifically SMB and Retail

4. Job Separations (furlough vs. lay-offs)

5. Interest on Corporate Bonds

6. Copper Spot Pricing

7. Inventory to Sales Ratio

8. International Synchronization


Some Indicators to Watch

32 The State of Trade: 3 Trends to Expect in 2020.

Q&A

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