Trade could be volatile ahead
? Singapore’s NODX grew 9.5% yoy in Feb, falling short of our and Bloomberg
consensus estimates for the first time in six months.
? Electronic NODX should continue its robust performance in 2022F as chip
manufacturers see a limited impact from the Ukraine crisis.
? However, China’s ongoing zero-Covid-19 strategy and lockdowns could
further exacerbate existing supply-chain disruptions, hurting trade.
NODX underperforms expectations in Feb
Singapore’s non-oil domestic exports (NODX) rose 9.5% yoy in Feb 2022 (vs. +17.6% yoy
in Jan 2021), falling short of both our and Bloomberg consensus estimates for the first time
since Aug 2021. On a seasonally-adjusted (SA) basis, NODX contracted 2.8% mom SA in
Feb, a reversal from the 5.0% mom SA growth in Jan. Electronic NODX grew yoy and mom
SA in Feb, whereas non-electronic NODX grew yoy but declined mom SA. Despite the
ongoing geopolitical crisis in Ukraine, Singapore’s NODX continues to post robust figures
yoy. However, should the conflict persist for longer than expected, volatility in commodity
prices and dampened global demand could weigh on Singaporean trade. Moreover, as
China continues its zero-Covid-19 policy, further mass lockdowns in the country,
particularly in coastal areas, could severely disrupt supply chains.
Chip exports likely to remain strong despite Ukraine crisis
Electronics NODX decelerated but grew a robust 11.6% yoy in Feb vs. +14.0% yoy in Jan,
contributing 2.7% pts to (or 29% of) Feb’s NODX growth and marking 15 months of
consecutive yoy increases. The strong growth in electronics was mostly driven by parts of
integrated circuits (ICs) (+21.6% yoy in Feb). The Semiconductor Equipment & Materials
International (SEMI) mentioned last week that it projects the global semiconductor industry
sales to more than double to US1.3tr by 2030 from the record US$555.9bn in 2021. Despite
positive news for the long-term trajectory of semiconductors, the near-term outlook remains
volatile. Ukraine is a major producer of neon gas critical for lasers used in chipmaking (neon
gas prices shot up 600% during the Crimea Crisis in 2014) and Russia supplies c.33% of
global palladium demand. However, companies such as Intel and GlobalFoundries (which
has operations in Singapore) have so far downplayed the impact on their supply chains
quoting prior experience over Russia’s annexation of Crimea. About 93% of electronics’
growth in Feb was driven by ICs alone (see Fig. 3).
Non-electronic exports slowed down in Feb
Non-electronic NODX decelerated in Feb, rising 8.8% yoy (vs. +18.6% yoy in Jan). The
expansion was mainly driven by exports of structures of ships & boats, pharmaceuticals
(+39.5% yoy in Feb vs. -11.1% yoy in Jan), and petrochemicals (+19.4% yoy in Feb vs.
+22.0% yoy in Jan). Feb was the second month in a row that structures of ships & boats
were the largest contributor to growth in NODX. The more than 100x yoy increase in Feb
may perhaps be attributed to the completion of high value ships that were sold abroad.
Nevertheless, we reiterate our projection that specialised machinery exports will remain
robust this year, as global chip manufacturers scramble to shore up supply to meet demand
by investing heavily in production facilities.
EU 27, China and Malaysia top importers of NODX in Feb 2022
Singapore’s NODX to its top 10 markets as a whole rose by 9.2% yoy in Feb, in tandem
with its overall NODX growth. The NODX value to half of its top 10 markets rose, whereas
its NODX to the other half – Hong Kong, South Korea, the US, Thailand and Indonesia –
declined. Feb trade growth was mainly driven by the EU 27, China, and Malaysia.
Specialised machinery, in particular the ones used for semiconductor manufacturing,
appeared among the top three imports by the EU 27 and Malaysia, underscoring the global
effort to shore up chip production and for regions to reduce international reliance on the
product. Meanwhile, pharmaceuticals appeared amongst the top three imports by the EU
27 and China.