Rushing to export before January!

With the conclusion of the U.S. elections and the gradual establishment of the "Trump Cabinet 2.0," the trade policy stance of the new federal government is taking shape. Against this backdrop, the "export rush" effect of Chinese enterprises is beginning to emerge.

The manufacturing PMI data for China in November shows that the new export orders index rose by 0.8 percentage points month-on-month to 48.1%, while the PMI for small enterprises, which are more closely related to exports, increased by 1.6 percentage points month-on-month to 49.1%, demonstrating a stronger-than-expected seasonal performance compared to previous export growth rates.

Tianfeng Securities researchers Song Xuetao and Sun Yongle analyzed that, based on the experience from the last round of trade friction, the window period for "export rush" generally starts from the occurrence of trade friction events and ends when tariffs are officially imposed. After that, the export growth rate of related goods may experience a significant decline.

Huatai Securities researchers Yi Han and Wu Wanyi also stated that considering the historically low inventory-to-sales ratio of U.S. wholesalers across multiple categories, the demand for restocking may drive a more pronounced "export rush" effect.

Tianfeng Securities predicts that the window period for this round of export rush will be shorter than the previous one, and the intensity of the export rush may be higher.

How is the "export rush" progressing?

Huatai Securities has tracked the progress of the "export rush" from dimensions such as freight rates, container shipping volumes, and the activity level of U.S. ports.

1. Tracking the "export rush" progress through port activity and freight rate changes

1) Container freight rates and port throughput in China: Recently, China's container freight rate index has generally rebounded month-on-month, and port throughput has rapidly increased. The cargo and container throughput at Chinese ports have risen by 5.6% and 6.0%, respectively, since the U.S. elections (as of November 29). The China Container Freight Index (CCFI) has increased by 6.5% since December 22, the date of the U.S. elections, and as of November 22, the average monthly value of the Shanghai Containerized Freight Index (SCFI) has rebounded by 7.5% month-on-month.

2) Global shipping market prices: Since the U.S. elections, the BDI and RJ/CRB commodity price indices have risen by 12.5% and 1.5%, respectively, reflecting a rebound in global demand for basic commodities and trade activity. Additionally, from the U.S. elections to November 25, the container freight rate index for Southeast Asia routes increased by 9.9%.

3) Activity level of U.S. foreign trade ports: The throughput and congestion index of major U.S. foreign trade ports have rebounded month-on-month, and the price index for China-U.S. routes has seen a narrowing decline. From November 2 to 23, the container throughput at the Port of Los Angeles increased by nearly 70%, while the congestion index for the Port of Charleston, Oakland, and Savannah also rose by 25.9%, 25.0%, and 14.6%, respectively, during the same period In addition, the Baltic Dry Index, which reflects the changes in trade flow and freight costs between China and the United States, saw a reduction in decline from November 2 to 23 compared to the previous month.

2. Observing "export rush" and characteristics of overseas destinations from freight rate changes

Southeast Asia and Mediterranean routes saw stronger month-on-month freight rate increases than China-US routes after the US election—In the China Export Container Freight Index, the Southeast Asia and Europe routes increased by 22.8% and 9.5% respectively from November 5 to 22, while the freight rates for the East and West US routes remained relatively weak. The Shanghai Container Freight Index showed that the container shipping rates for Southeast Asia, Mediterranean, and European routes increased by 13-40%, possibly reflecting changes in the export routes to the US as the industrial chain continues to shift to Southeast Asia. As we found in "Observing the Path of Chinese Manufacturing Going Overseas from Freight Rate Changes" (2024/5/27), the freight rate increases for Chinese container exports to South America, Africa, and other regions were significantly higher than those for European routes in the first half of the year, indicating a trend of diversification in overseas destinations for enterprises.

What are the characteristics of this round of "export rush" by enterprises?

Tianfeng Securities believes that the implementation time of Trump's tariff increase may be earlier, which could lead to a shorter and more intense window period for this round of export rush compared to the previous one. The continuous growth in export share combined with the opening of the export rush window is expected to lead to a period of rapid growth in exports.

Huatai Securities also believes that as expectations for US tariff increases rise, the overseas expansion process of Chinese enterprises may accelerate, supporting export growth. Currently, Southeast Asia may have the highest concentration of Chinese "overseas production capacity," but the overseas capacity of China to Latin America, the Middle East, Africa, Hungary, and other regions is clearly accelerating.

Huatai Securities stated that by category, as of September this year, the inventory-to-sales ratio of wholesalers in the US for electrical equipment, pharmaceuticals, chemicals, specialized equipment, and computer electronics is at a relatively low historical percentile, and the demand for restocking may drive a more significant "export rush" effect in the future.

In addition, domestic measures to cope with trade frictions may also have heterogeneous impacts on different industries. On November 15, the Ministry of Finance and other departments announced the cancellation of export tax rebates for aluminum and copper materials, as well as some oil products, while the export tax rebate rates for some refined oil, photovoltaics, batteries, and certain non-metallic mineral products were reduced from 13% to 9% Industries with relatively limited capacity may drive price increases (such as aluminum).

The main viewpoints in this article are derived from the research reports published on December 2 by HTSC's Yi Han (SAC License No.: S0570520100005) and Wu Wanyi (SAC License No.: S0570524090005) “Macroeconomics: Accelerating Exports After the U.S. Election” and TF SECURITIES' Song Xuetao (SAC License No.: S1110517090003) and Sun Yongle (SAC License No.: S1110525010001) on the same day “Initial Signs of 'Rushing for Exports'”, with some edits from Wall Street Insights