Regional shipping disruptions cut trade surplus 25% in July

Regional shipping disruptions weigh on trade flows: Saudi Arabia’s merchandise trade surplus narrowed 25% y-o-y in July, with exports down 17.2% and imports down 15.4%, according to Gastat figures (pdf). “The decline reflects a combination of weaker external demand and disruption to regional trade and shipping. Higher transport and ins. costs, as well as supply-chain disruption, have also affected exporters,” Oxford Economics lead economist Akanksha Samdani tells EnterpriseAM.

Shipping through both the Strait of Hormuz and the Red Sea has been disrupted, and alternative routes offer only a partial offset, Samdani says. “If uncertainty persists, higher shipping and input costs and weaker external demand could continue to weigh on trade,” she adds.

July is where the lag shows up: Yanbu still handled 78% of seaborne crude exports that month, but Houthi threats against vessels calling at Saudi ports were making the Kingdom's main alternative to Hormuz harder to use.

The breakdown: Oil exports fell 12.8%, and non-oil exports, including re-exports, fell 26.2%. Re-exports dropped 40%, driven by a 67.7% collapse in machinery, equipment, electrical appliances, and parts. Plastics, rubber, and related products held the largest share of non-oil exports at 19.8% despite falling 17.8%, followed by chemicals and related industries at 18.6%, down 32.1%.

China remained the largest merchandise trading partner, accounting for 13.4% of exports and 22.7% of imports in July. “China is an important trading partner, particularly on the import side,” Samadani says, leaving Saudi trade exposed to shifts in Chinese demand. Diversifying partners could reduce this exposure and strengthen resilience.

“The near term outlook is likely to remain challenging,” with export orders still weak, Samdani says, but maintains that it is too early to conclude from one month of data that this reflects a slowdown in Vision 2030 investment, as trade disruptions and the timing of deliveries can also affect imports.” A recovery would depend on regional shipping normalizing and external demand picking up.