Tradeshift Releases Index of Global Trade Health for Q2 2020

Tradeshift has released its ‘Index of Global Trade Health’ for the second quarter of 2020. It shows that global trade declined by 14.8 percent. The UK was hit hardest by the lockdown. In June, upward trends are emerging. China shows the strongest recovery. Even within the EU, there was an upward trend in June.

(San Francisco) Tradeshift, a provider of supply chain payments and marketplaces, released its Index of Global Trade Health. This clearly shows that global trade, according to the latest data from Tradeshift, declined by 14.8% in the second quarter of 2020. However, signs of an upward curve in June suggest that the impacts of the COVID-19 pandemic may have reached their lowest point at the lower end of the range predicted by the World Trade Organization (WTO) of 13-32%.

The Tradeshift Index of Global Trade Health provides an overview of the developments in current trade and payment activities between businesses across global supply chains. It analyzed the total volume of weekly and monthly B2B transactions on the Tradeshift platform in the second quarter and compared it with the first quarter and pre-lockdown figures. Over 1.5 million buyers and suppliers use Tradeshift to place orders and process invoices, with over $500 billion in transactions processed annually through the business trading platform.

Transaction Volume in the EU Rises Again by 38 Percent in June

According to the report, the UK experienced the largest losses in the second quarter compared to the first, with a decline in transaction volume of its trade activities (orders and payment activities) by 23.1%. The transaction volume across the EU fell by 21.9%, while activity in the US decreased by 16.1%.

Of all industry sectors, retailers suffered the most. Transaction volume dropped by nearly half in April and May before recovering slightly in June. Companies in manufacturing and machinery ended the second quarter with a 2.5% increase in activities in June compared to the monthly average of the first quarter.

Transport and logistics companies benefited during the pandemic from the boom in last-mile delivery services, which somewhat offsets the broader challenges the sector faces due to declines in other areas. The food and beverage industry remained relatively stable in the second quarter, without the wild spikes seen in the first quarter when panic buying peaked.

The EU recorded the largest decline in transaction volume in the week of April 13, with a drop of up to 44% compared to pre-lockdown figures. A slight recovery began in May, which continued more strongly in June. Compared to April, the transaction volume here was again 38% higher. In the US, activity increased by 34% during the same period.

Order Volume in the EU Increases by 24 Percent in June

Also in the week of April 13, orders fell by up to 58% compared to pre-lockdown figures. A first slight increase occurred at the end of April after the Easter holidays with an increase of 16%. In the last week of May, this figure even rose to an increase of 62%. Thus, the Eurozone benefited the most from a “post-lockdown recovery,” with the number of orders in the entire month of June increasing by an average of 24% compared to the lows in April. In the US and the UK, order volumes have also begun to rise since the end of May, but the increase in activity was much less pronounced.

Payments to Suppliers Recover Slowly Despite Upward Trend

While order volumes show an upward trend, payments to suppliers are not keeping pace with the recovery. Invoice volumes in the EU, the UK, and the US declined overall by 19% in the second quarter.

Compared to the first quarter of 2020, invoice volumes in the EU fell by over 24% in April. Initial recoveries were evident in May, continuing in June with a decline of only 17%. Invoice numbers in the US remained largely stable in the second quarter despite a significant decline in orders.

The report shows that invoice volumes are starting to increase again, but this is happening only slowly. As many suppliers are cash-strapped after a prolonged period of inactivity, the lack of working capital flowing through the supply chains could hinder these suppliers from fulfilling orders, which would slow the recovery.

Lack of Working Capital Could Hinder Upward Trend

“Trying to restart supply chains without quick and predictable access to working capital is a bit like trying to start a car without gas in the tank. You won’t get very far,” explains Christian Lanng, CEO of Tradeshift, the situation. “The various stimulus measures from many governments have made a significant contribution to keeping businesses from the worst downturn. But now that a new chapter of the pandemic begins, we need to look for new ways to unlock liquidity and get it flowing quickly to cash-strapped suppliers.”

Tradeshift is working with some of the world’s largest organizations to offer digitized financing options that facilitate the early payment of supplier invoices. The company recently announced a partnership with the Danish Export Credit Agency (EKF) aimed at unlocking more than $55 billion in liquidity through an innovative program for supply chain financing confirmed by the Danish government.

Developments in China as a Trend Indicator for Trade

China, which had the greatest influence on trade in the first quarter, saw a 31.8% increase in trade activities in the second quarter. The transaction volume in China rose by 430% when factories reopened at the end of February. Activity increased by another 14% as lockdown restrictions began to ease in April, but this momentum has gradually weakened. The average weekly transactions in China have decreased by 8% since the week of June 15, and as impressive as the country’s recovery was, trade activity remained 22% below the level that Tradeshift recorded on its platform in the last quarter of 2019 during the last two weeks of June.

“China’s recovery is a useful indicator of what the shape of recovery might look like when other countries begin to bring the spread of the virus more and more under control,” explains Lanng. “A huge domestic market gives China certain advantages in terms of the speed of its recovery. But the interconnected nature of global supply chains means that even China alone cannot fully recover. The entire ecosystem needs to be in good shape. Right now, that is not the case.”

About Tradeshift

Tradeshift drives supply chain innovation for the digitally connected economy. As a company for supply chain payments and marketplaces, Tradeshift helps businesses, buyers, and suppliers digitize their trade transactions, streamline processes, and connect to supply chain applications. More than 1.5 million companies in 190 countries use the solutions. More than half a billion US dollars in transaction value are processed. Thus, Tradeshift’s cloud-based B2B trading platform, which is based on a network concept similar to LinkedIn and a flexible app ecosystem, is one of the most important global business networks for buying and selling.

Photo: © Adobe Stock / Graphics: Tradeshift
https://tradeshift.com/de/