Reports
ISC-North America trade benefits from trade war
The surge in North American imports from the India Subcontinent has been spurred by the U.S.-China trade war and more expensive labor costs in China, while the Coronavirus could potentially exacerbate this shift.
By Hailey Desormeaux on Feb 13, 2020 15:02

   Container vessel capacity and trade in goods between the India Subcontinent (ISC) and North America has been increasing at a steady pace.
   This trend is more pronounced from the ISC to North America, where trade has held strong due to the U.S.-China trade war resulting in increased U.S. imports from the ISC, coupled with higher manufacturing labor costs in China, which have been pushing production elsewhere for years, such as the ISC, where manufacturing labor costs tend to be cheaper.
   There is also potential the Coronavirus could further boost trade between the ISC and North America due to the virus wreaking havoc on China, thus possibly leading North America to import more goods from the ISC. 
   For this analysis, the ISC refers to Bangladesh, India, Maldives, Pakistan, Sri Lanka and two landlocked countries, which include Bhutan and Nepal; and North America refers to the U.S. and Canada, although the U.S. comprises the bulk of the North America trade.

Bolstering the ISC-North America trade. U.S. goods imports from ISC countries in 2019 collectively increased 6.2% year-over-year to $71.14 billion, as illustrated in the table below, which was built using not seasonally adjusted data from the U.S. Census Bureau.

2020_2_13Cc

   Meanwhile, U.S. goods exports to ISC countries in 2019 collectively rose 2.5% year-over-year to $39.91 billion, as illustrated in the table below, which was also built using not seasonally adjusted data from the U.S. Census Bureau.

2020_2_13Dd

   Trade between Canada and India, Canada’s top trade partner in the ISC, has also been surging. Canada’s goods imports from India totaled $4.28 billion Canadian for 2019, up 8.5% year-over-year, while its goods exports to India reached $4.99 billion Canadian, up 12.5% year-over-year, according to Statistics Canada data that was shown on a seasonally-adjusted and presented on a balance of payment basis.
   Trade between the ISC and North America is only likely to continue increasing, particularly from the ISC to North America, due to trade barriers in place between the U.S. and China, higher manufacturing labor costs in China than in prominent ISC countries, and the Coronavirus.
   Even though the U.S. and China have reached a “phase 1” trade deal, many of the tariffs are still in place, and therefore, countries in the ISC will likely continue to benefit from increased exports to the U.S.
   U.S. tariffs on China resulted in India gaining $755 million in additional exports to the U.S. in the first half of 2019, including $243 million in additional exports of chemicals, $181 million in additional exports of metals and ore, and $83 million in additional exports of electrical machinery, according to a United Nations on Trade and Development study released in November 2019, dubbed, “Trade and Trade Diversion Effects of United States Tariffs on China.”
   Additionally, the average annual salary of a manufacturing worker in China, the top country overall the U.S. imports goods from, is substantially higher than in India, Bangladesh and Pakistan, the top three countries in the ISC the U.S. imports goods from. Cheaper labor costs in these ISC countries could potentially further spur more shipments on the ISC to North America trade.
   The average annual salary of a manufacturing worker in China is $10,520, compared to $3,927 in India, $1,904 in Bangladesh and $3,581 in Pakistan, according to the Japan External Trade Organization’s (JETRO) 2018 JETRO Survey on Business Conditions of Japanese Companies in Asia and Oceania. JETRO defined annual salary as the total liability for an employee, including the total of annual base salary, benefits, social security, overtime allowances, and bonuses, but excluding severance benefits.
   Meanwhile, blanked sailings announcements out of China continue to surface, largely due to the Coronavirus. As of Feb. 10, there have been a total of 40,235 cumulative cases confirmed in China, according to World Health Organization (WHO) data. Although trade between China and North America will definitely be hindered by the virus, at least through the rest of the first quarter of 2020, this could (potentially) increase North American imports from the ISC, where cases of the virus are extremely low. As of Feb. 10, WHO data shows that in the ISC, the only confirmed cases are in India with three reported cases, and one reported case each in Nepal and Sri Lanka.

ISC-North America trade over the years. Weekly allocated TEUs on the ISC to North America trade stood at 22,676 TEUs as of this January, up 4.4% from one year earlier and up 49.8% from five years prior, as illustrated in the chart below, which was built using BlueWater Reporting’s Capacity Report. The chart also shows that weekly allocated TEUs on the North America to ISC trade stood at 13,962 TEUs as of this January, up 3.5% from a year earlier and up 13.2% from five years prior.
   Weekly allocated TEUs refer to the amount of TEUs each week that are not only deployed on the trade, but also set aside specifically to serve that trade.

2020_2_13Ee

   Meanwhile, the chart below, also built using BlueWater Reporting’s Capacity Report, shows that weekly deployed TEUs in both directions on the ISC-North America trade have also increased over the last five years, although much more substantially from the ISC to North America.

2020_2_13Ff

   Data from BlueWater Reporting’s Capacity Report also shows that average container vessel size on the ISC to North America trade stood at 7,659 TEUs as of January, while average container vessel size on the North America to ISC trade totaled 7,781 TEUs, as illustrated in the chart below. As with many trades, average vessel size on the ISC-North America trade in both directions substantially increased in the run-up to the Panama Canal expansion in June 2016 and continued increasing until about 2019, when average vessel size began to level out.

2020_2_13Gg

   However, while many trade lanes around the globe have provided shippers with a dwindling number of options over the years in terms of available container services and container vessel operators on trades as a result of consolidation, the ISC to North America trade has been rather resilient to this trend, most likely due to high demand on the trade.
   As of January 2020, seven container services were operating on the ISC to North America trade, which was actually a slight increase from five years earlier, although the number of container vessel operators did decline. This can be seen in the table below, which was built using BlueWater Reporting’s Capacity Report and Carrier/Trade Route Deployment Report.

2020_2_13Hh

   The effects from consolidation were more prominent on the North America to ISC trade, where the number of container services and the number of container vessel operators both declined over the last five years, as illustrated in the table below.

2020_2_13Ii

   In regards to the seven container services currently operating on the ISC to North America trade, the INDAMEX/IEX loop - jointly operated by Hapag-Lloyd, CMA CGM, ONE and OOCL - allocates the most capacity each week towards the trade, followed closely by MSC’s Indus Express, as illustrated in the chart below, which was built using BlueWater Reporting’s Capacity Report.

2020_2_13Jj

   These same two services also dominate the North America to ISC trade, as illustrated in the chart below, which was also built using BlueWater Reporting’s Capacity Report.

2020_2_13Kk

   In terms of the fastest container services (excluding potential transshipment options) from the ISC to North America, the fastest transits take 18 days on THE Alliance’s EC5 loop from Colombo, Sri Lanka to Halifax, Nova Scotia, as illustrated in the table below, which was built using BlueWater Reporting’s Region to Region Transit Analysis by Service tool. From India to the U.S., which comprise the bulk of the ISC to North America trade, the fastest transits take 20 days from Mundra to New York on the INDAMEX/IEX loop.

2020_2_13Ll

   From North America to the ISC, the fastest transits are from New York to Colombo at 24 days on the 2M Alliance’s TP12/Empire loop, as illustrated in the table below, while from the U.S. to India in specific, the fastest transits take 28 days from Charleston, S.C. to Port Qasim on the INDAMEX/IEX loop. 

2020_2_13Mm

   In terms of carriers, Maersk Line and MSC dominate the ISC to North America trade, as illustrated in the chart below, which was built using BlueWater Reporting’s Carrier/Trade Route Deployment Report. The two carriers collectively hold a 56% share on the trade in terms of weekly allocated capacity. 

2020_2_13Nn

   On the North America to ISC trade, MSC has a strong lead, followed by Maersk Line and Hapag-Lloyd, which each hold a 21% share on the trade in terms of weekly allocated TEUs. This can be seen in the chart below, which was also built using BlueWater Reporting’s Carrier/Trade Route Deployment Report.

2020_2_13Oo

BlueWater Reporting Outlook: Trade between the ISC and North America is expected to remain strong over the course of the next several years, especially if trade barriers between the U.S. and China aren’t further broken down in the near future and manufacturing labor costs in China continue to be higher than in India, Bangladesh and Pakistan. It’s too early to forecast the exact extent the Cornoavirus will have on the ISC-North America trade, but if anything, it will result in increased shipments from the ISC to North America at the expense of shipments on the China to North America trade.
   Interested in our data? Contact sales here for more information.