The Port of Singapore as a barometer of health of China’s economy and global trade

OREANDA-NEWS. Shipping, rather than commodity prices, can often be a good barometer of the overall health of China’s manufacturing and of international trade, so it was quite a surprise to see a large number of empty container berths in the vast, sprawling container terminals of Singapore last week.

When driving in from Changi airport at night, the first indicator was the large number of container gantry cranes with their booms up, rather than down and working cargo. It may have been dark, but each crane is lit, so as not to be a hazard to aviation, so they were clear to see.

As my taxi drew nearer to the Tanjong Pagar, Keppel and Brani terminals, my eyes were not deceiving me and it was crystal clear that there were few ships in port. As we drove further west towards my final destination, near the new Pasir Panjang terminal, capable of handling the largest container ships in the fleet, the skyline was filled with upward pointing container crane booms.

Just one ship occupied the easternmost berths of the Tanjong Pagar Terminal on the afternoon of March 26, 2016, with idle gantry cranes from the Keppel Terminal visible in the background. Photo by Anthony Poole.

Normally in Singapore, as soon as a ship comes off a berth, another is in place to quickly move alongside to take its place; but not so in the third week of March.

A large percentage of the container traffic in Singapore carries manufactured goods from China. The big ships come in, discharge thousands of containers that are destined to be transshipped onto smaller vessels better suited for trading to the Indian subcontinent and parts of the Middle East. Singapore also handles a large volume of empty containers on their way back to China.

Nowadays, when the bigger ships do come in, it is clear they are carrying far fewer containers than usual.

Some say the high rates charged by the Port of Singapore are to blame, but several sources in the container business argue that Singapore has little competition as such a major transshipment point in southeast Asia and can, therefore, justify charging high rates compared with many other large, mainline container ports.

A more typical view of the easternmost berths of Tanjong Pagar Terminal, Singapore, May 27, 2013, a year in which Singapore handled 32.58 million containers. Photo by Anthony Poole.

The statistics speak for themselves and confirm what the eye sees. In January, Singapore handled 2.49 million containers, down 10.4% from the 2.78 million that passed through the port in January 2015, according to the port’s own data. In February, Singapore handled 2.41 million containers, down 7.3% from 2.6 million a year earlier.

While Lunar New Year was in the first week of February, shipping is a 24/7 business, 365 days a year, and this year is a leap year, meaning that February had one more day compared with February 2015, yet the throughput still fell.

Given that we know China’s real slowdown began in late 2014 and gathered pace in 2015, it is not surprising that we see this reflected in the annual container throughput in Singapore in 2015 compared with 2014. In 2015 Singapore handled a total of 30.92 million containers, down 8.7% from 33.87 million in 2014. The 2014 total is clearly the high-water mark over the last 10 years and was up from 32.6 million mt in 2013.

One ship on the easternmost line of berths of the Tanjong Pagar Terminal in Singapore on the afternoon of March 26, 2016, and several gantry cranes not in use in the Keppel terminal in the background. Photo by Anthony Poole.

With data in for just two months of 2016 so far, it is too early to tell whether this downward trend will continue. In the first two months of this year, throughput is down 8.85% year on year. If the trend continues, total throughput could fall to around 28.1 million containers, making 2016 the slowest year since 2010, when Singapore handled 28.43 million containers.

Some analysts argue that China is transitioning from being a manufacturing economy to one based on services and consumerism. If true, it implies the port throughput figures in Singapore could be in long-term decline, unless it becomes an import-dependent economy. But it is highly unlikely China as a service economy will succeed in keeping hundreds of millions of people employed. Only manufacturing can do that, which suggests that, at some point, Chinese manufacturing and exports will recover, and the container throughput in Singapore will also.

Given China’s demand for raw materials has such a significant bearing on the price of industrial commodities from crude oil to base metals, a visible recovery in international trade will be of interest to the broader commodities complex.