New Articles

WTO Downgrades Trade Growth Forecasts

WTO Downgrades Trade Growth Forecasts

Geneva, Switzerland – The World Trade Organization has reduced its forecast for world trade growth in 2014 to 3.1 percent, a significant drop from the 4.6 percent it made in April.

In addition, it also cut its estimate for 2015 to 4.0 percent from its previous 5.3 percent forecast.

The downgrade “comes in response to weaker-than-expected GDP growth and muted import demand in the first half of 2014, particularly in natural resource exporting regions such as South and Central America,” the global trade group said.

Beyond the specific downward revisions, it said, “risks to the forecast remain predominantly on the downside, as global growth remains uneven and as geopolitical tensions and risks have risen,” while “international institutions have significantly revised their GDP forecasts after disappointing economic growth in the first half of the year,” said WTO Director-General Roberto Azevêdo.

When the last forecast was released in April 2014, conditions for stronger trade growth seemed to be falling into place after a two year slump that saw world merchandise trade grow just 2.2 percent on average during 2012–13, with leading indicators at the time pointing to an upturn in developed economies and Europe in particular.

“Although growth has strengthened somewhat in 2014, it has remained unsteady,” the WTO said with output in the US during the first quarter of this year falling by –2.1 percent, annualized rates and in the second quarter in Germany by –0.6 percent, “sapping global import demand.”

China’s GDP growth also slowed from 7.7 percent in 2013 to 6.1 percent in the first quarter of this year before rebounding in the second. The slow first quarter contributed to weak exports in trading partners.

“As a result of these and other factors, global trade stagnated in the first half of 2014, as the gradual recovery of import demand in developed countries was offset by declines in developing countries,” the WTO said.

Growth in trade and output “is expected to be somewhat stronger in the second half of 2014 as governments and central banks may provide policy support to boost growth, and as idiosyncratic factors such as harsh weather conditions in the US and a sales tax rise in Japan weighted on trade in the first half of this year begin to fade.”

However, the WTO said, “several risk factors on the horizon have the potential to produce worse economic outcomes.”

For example, it said, tensions between the European Union and the US on the one hand and the Russian Federation on the other over Ukraine have already resulted in trade sanctions on certain agricultural commodities, and the number of products affected could widen if the crisis persists.

At the same time, the continuing conflict in the Middle East “is also stoking uncertainty, and could lead to a spike in oil prices if the security of oil supplies is threatened.”

This is the moment, he said, “to remind ourselves that trade can play a positive role here. Cutting trade costs and broadening trade opportunities can be a key ingredient to reversing this trend,” said the WTO’s Azevêdo.


Giant Russian Steelmaker Shutters US Operations

Los Angeles, CA – Russian steelmaker Severstal is divesting itself of its steel production and coal mining operations in the US.

The move was reportedly motivated by the company’s fears that the increasing tensions between Washington and Moscow over the crisis in Ukraine will reduce, or even cut off, its access to loans from Western financial institutions.

Russia’s second largest steel maker said it would sell its two US steel facilities in Mississippi and Michigan for $2.3 billion to US rivals Steel Dynamics and AK Steel, respectively. Both plants produce steel products for the automotive sector.

According to a statement released by the Severstal, the company reported a $100 million loss on revenue of $3 billion last year, a development that it hopes will be offset by the US divestment.

“The sale of Columbus and Dearborn unlocks substantial value to Severstal’s shareholders,” said Alexey Mordashov, Severstal’s chief executive.

The ‘mini-mill’ in Columbus, Mississippi, is considered one of the most modern in the US, and is expected to increase its operating base by as much as 40 percent.

Steel Dynamics said the $1.6 billion purchase of “one of the most modern mini-mills in North America,” in Columbus, Mississippi, will expand its operating base by 40 percent.

The $700 million purchase of the Dearborn, Michigan, steel plant, “will add about one-third additional capacity to the company’s operations,” said AK Steel.

At the same time, Severstal said that it would sell US coal producer PBS Coals to Toronto, Canada-based Corsa Coal Corp. for a reported $140 million.

The sale comes after the Russian company paid about $1 billion for PBS in 2008 to provide a steady supply of coking coal for its US steelmaking operations.

Corsa said it will pay $60 million in cash, assume $60 million of reclamation and water-treatment liabilities, and give the former Russian owner the balance of $20 million “in collateral for other liabilities.”

The sale of PBS Coals is expected to be completed by mid-August, Severstal said.

PBS is located about 60 miles from Pittsburgh, Pennsylvania, and has 13 developed and three active mines that produced 1.7 million tons of coal last year.