Chinese Manufacturing Expansion Affects Shipping Demand

The expansion of the Chinese Manufacturing Industry continued in September at unchanged pace as compared to the month before, BIMCO reports. The manufacturing industry accounts for around 1/3 of the Chinese economy and is a relevant indicator to watch out for in the shipping industry. What goes on in the manufacturing sector affects demand for container shipping and dry bulk shipping primarily. China Manufacturing PMI is a leading indicator for economic activity and development in GDP.

The two measurements of Purchasing Manager Indexes (PMI) of Manufacturing both came in unchanged from the month before – unprecedented in itself, and only somewhat encouraging for the industries depending on continued expansion of the manufacturing sector.

1. The official PMI, compiled by Fung Group, lean towards the larger and state-owned enterprises revealed a positive image of the situation by highlighting expansion of output, new orders and new export orders. PMI remained at 51.1 in September.

2. The second measurement of Chinese PMI, compiled by Markit and HSBC, lean towards the private sector and the small and medium sizes enterprises revealed that production continued to increase albeit at slowest pace in four months. However, job shedding across the sector continued in spite of a strong rise in new export work. PMI remained at 50.2 in September.

Chief Shipping Analyst at BIMCO, Peter Sand, said: "The PMI numbers are first and foremost positive. Any PMI number above the standstill threshold at 50 is good news and tell us that expansion is ongoing. Expansion of the manufacturing sector point towards increased demand for shipping.

“For container shipping the increase in new export orders are very welcome as larger exports volumes on the high-capacity trading lanes from China towards Europe and the US are needed.

“2014 has so far been a year with increased uncertainty around the level of GDP growth in China. A solid activity level in the manufacturing sector contributes positively to support a continued strong economy in China.

New data on key indicators sheds light on present, near-term and future shipping market. This news piece follow up on BIMCO market reports and comments to commercial developments for the three main shipping segments.