Global trade is facing further difficulties after the Russia-Ukraine war had a huge impact on global crude oil and food prices. The WTO has already raised its forecast for global trade from 4.7 per cent to 3% in April, 2022 and we expect further downward revision in October, 2022.
The contraction in global trade is also visible from a sharp drop in freight rates, which have reduced by nearly 50% on major trade routes. Freight from Asia to Northern Europe and the Americas (West Coast) fell from US$14,000 to US$4,000 and US$8,000, respectively.
With inflation in all economies, inventories are very high globally in all economies as purchasing power has diminished affecting offtake and thus slowing demand. However, the demand for low value products is increasing by leaps and bounds. So, while we expect volumes to remain intact, the price could take a hit. This is also because the prices of most of the commodities: steel, ferro alloys, plastic polymers, cotton yarn etc. have come down significantly. This will affect our exports in two ways: the value of raw material exports will decrease and (ii) the value of the final product manufactured from such raw materials will also decrease as input prices have declined.
However, various opportunities are also coming our way. Buyers are moving on from China as China with a zero covid tolerance policy is becoming costlier and less reliable and anti-China sentiments are getting stronger day by day. A lot of orders for low value products, which used to be a virtual monopoly of China, are now coming to India.
While the Russia-Ukraine war is a blow to our exports in the short term, we want to increase our exports to Russia after the introduction of the Rupee payment mechanism. According to our study, we can add about 5 billion US dollars in exports to Russia. With Europe maintaining sanctions on Russia, we expect trade to shift from Russia to India. This has already happened in respect of petroleum products, iron and steel and food products and is likely to intensify in the times to come.
If you want to export, contact Global Trade Bazaar