A recovery in global trade during the summer is beginning to wane, according to some early warning signs pointing to the negative effects of widespread Covid-19 outbreaks in the manufacturing centres of east Asia.
A dramatic decline in exports from Taiwan, which makes many of the computer chips used in cars and mobile phones, has combined with temporary port closures and lockdowns in Australia, China and Japan to cut the level of global trade.
The signs of a slowdown sparked a reaction at the weekend from a key member of the oil cartel Opec, who said plans for an expansion of oil output may need to be scrapped.
Kuwait’s oil minister, Mohammad Abdulatif al-Fares, said the 400,000 barrel-per-day increase in oil output agreed by Opec and its allies, a grouping known as Opec+, at previous meetings this year to match rising demand might be reconsidered at its next gathering later this week.
The minister told Reuters that while the economies of east Asian countries and China continued to be affected by outbreaks of the Delta variant, “caution must be exercised”.
The cost of a barrel of Brent crude oil jumped by 11% last week to $72.70 a barrel in response to the concerns of cutbacks in supply by Opec and energy firms shutting US production in the Gulf of Mexico as Hurricane Ida bore down.
Edward Moya, a senior market analyst at OANDA, said: “Energy traders are pushing crude prices higher in anticipation of disruptions in output in the Gulf of Mexico and on growing expectations Opec+ might resist raising output given the recent Delta variant impact over crude demand.”
Economists at Llewellyn Consulting said the outlook for Taiwanese export orders, looking three months ahead, had fallen from 70% year-on-year growth in 2020 to just 20%.
After an 18-month backlog, the fall in export orders was likely to restrict the capacity of carmakers and other manufacturers over the coming months. Some car firms have warned customers that they face a wait of more than six months before some models are available again for sale.
“World trade continues to be disrupted by port closures, most recently at Ningbo – China’s third largest port – which have also contributed to the enormous increase in shipping container costs this year that result from many containers being stranded in places other than where they are needed,” said the independent consultancy.
“Another drag on world trade has been the persistent shortage of semiconductor chips, which are nowadays a crucial input into motor vehicle manufacturing. Given Taiwan’s pivotal role in the global semiconductor industry, the decline in its export orders since February is a harbinger of some further slowing in world trade growth.”
Australia, which exports much of the world’s iron ore, is expected to narrowly avoid a second recession in two years when it reports national income (GDP) figures later this week. Some analysts expect the latest quarter to show it grew by as little as 0.1%, while others believe the country, where many cities and regions have entered fresh lockdowns, might see its GDP go into reverse.
Recent business surveys in the UK, Europe and the US have shown that a rapid expansion across the developed world following the lifting of restrictions in the spring has begun to peter out.
On Friday, the head of the US central bank, Jerome Powell, said the impact of shortages on prices was likely to be limited and not last beyond the end of the year.
However, some analysts have warned that low vaccination rates in some countries and the spread of the Delta variant will hinder the growth in exports well into 2022.
