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World trade falls 2.8% as Russia’s war in Ukraine affects container traffic

The value of world trade fell 2.8 percent between February and March as the Russian invasion of Ukraine led to a sharp drop in container ship traffic from the two countries, according to the Kiel Institute for the World Economy.

The Data by the German research institute indicate for the first time how badly the Ukraine conflict and the extensive sanctions imposed by the West against Russia have affected world trade since the invasion began on February 24.

Trade with Russia was hardest hit, as the value of imports into the country fell 9.7 percent month-on-month in March, while exports fell 5 percent, according to the Kiel Institute. Its indicator tracks real-time shipping data from 500 ports and seasonally adjusts the value of exports and imports to provide a measure of trade activity.

“Real distortions caused by the Russian invasion of Ukraine and the sanctions imposed by the West, as well as a high level of uncertainty among companies with links to Russia, are slowing down trading in March,” said Vincent Stamer, head of the Kiel Trade Indicator.

Shipping container traffic in St. Petersburg, Vladivostok and Novorossiysk, Russia’s three busiest container ports, halved over the past month due to sanctions imposed on the country and the withdrawal of many Western brands, the institute said. The main port of Ukraine in Odessa on the Black Sea is “virtually cut off from international maritime trade,” she added.

The war in Ukraine had a chilling effect on EU trade, reducing EU exports by 5.6 percent and imports by 3.4 percent in March. The impact on the US was milder as its exports fell 3.4 percent and imports fell 0.6 percent.

Column chart of month-on-month percentage change, price and seasonally adjusted, shows that global trade in goods contracted in March

In contrast, the impact on China was negligible as its exports fell 0.9 percent last month while imports rose 0.9 percent. Beijing has supported the Russian invasion of Ukraine more than the West and has not supported international sanctions against Moscow.

China’s zero-Covid lockdowns have had little impact on port traffic so far in Shanghai and other cities, but they increased congestion on container ships, the institute said. About 12 percent of all goods shipped worldwide were stuck on stationary ships – a figure surpassed for just two months last year.

The figures coincide with separate data compiled monthly by JPMorgan and ratings firm S&P, which showed the global Export Purchasing Managers’ Index fell to 48 in March, down from 51 in the previous month and the lowest since July 2020, when many countries entered severe coronavirus had restrictions in place.

This was also below the 50 level, indicating that a majority of companies are reporting a month-on-month decline in exports.

Line chart of Purchasing Managers sub-indices, below 50 = majority of companies reporting decline shows that global manufacturing exports fell in March

The decline in global manufacturing exports was geographically widespread, the PMIs showed, with two-thirds of the countries surveyed reporting a decline.

The war disturbed Deliveries of basic groceries and goods such as corn, wheat, potash, neon gas, nickel and palladium from Russia and Ukraine, two of the world’s largest producers of these commodities, which are driving up energy and food prices and curbing production at several car and truck manufacturers.

Pressure on trade could mount as the US and EU prepare a new round of sanctions against Russia in response to allegations of atrocities committed by the Russian military in Ukraine, including in towns near Kyiv.

That’s what the EU is planning target Russian coal importsexpand its restrictions on the country’s banking sector and impose export bans worth $10 billion

Washington, which is coordinating its crackdown on Moscow with other G7 and EU countries, is poised to ban new investments in Russia while increasing sanctions on the country’s financial institutions, state-owned companies and government officials.

https://www.ft.com/content/ae48f5b4-4928-4582-803c-6c2e02615154 World trade falls 2.8% as Russia’s war in Ukraine affects container traffic

Adam Bradshaw

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