Alternative Data Category Description
Economic trade data is a type of alternative data that has knowledge of a specific commodity's size, volume, mode of transportation, and market value. The data monitors how all commodities and products are moved globally between countries. As such it is an important economic indicator of businesses, trade, supply chain, and economic growth. The data is compiled using a variety of different sources. Some of these sources include online resources, government, public data, shipping firms, logistics companies, and transportation organizations.
Economic trade data compiles monthly import and export figures from customs offices, statistical research organizations, and other sources. It delivers unparalleled real-time market information in a dozen languages and all currencies. The data is assembled, arranged, and published incomprehensible charts and data structures using proprietary methodologies. The databases are well-organized, simple to use, and highly detailed by tariff code, value, weight, and price, as well as port and region when available. Bulk commodities like soybeans, grain, or oil & coal can be monitored but more granular product-level data is available for individual goods/commodities. These products are usually shipped in 20/40 ft containers and a standard measure is a TEU, or 20ft equivalent unit.
Often, there are industry classification codes included in trade data. The NAICS (North American Industry Classification System), or the SIC (Standard Industrial Classification) system. These systems are used to classify business establishments for the purposes of collecting and analyzing economic and trade data.
The Harmonized Tariff Schedule of the United States (HTS) sets out the tariff rates and statistical categories for all merchandise imported into the United States. This system defines all commodities or products with a 2 to 8-digit harmonized system (HS) code. The higher the number of numerical digits in the HS code the more granular the data is. At a very high level, 2 digits describe the category and a higher number gets into the products and sub-products, sometimes at a very detailed level. Using 6-digit data is the most useful to analyze products. A certain level of domain knowledge is required to find the product you are looking for in the data and it can be quite complex. There are 99 Chapters in a dictionary of HS codes which can be found in the following links: https://www.tariffnumber.com/ and https://hts.usitc.gov/current
Using alternative data on economic trade can provide investors with a number of benefits. The data can be used at an aggregated level for macroeconomic indicators, and it can also be used at a company level by looking at imports/exports by HS code. The data can be used for pricing research, information on important importers/exporters, and insights into the market, sector, and country trade patterns. It can be possible to see company-specific data to see what company X is trading. However, it is important to note that many companies redact their name and use logistics firms to move their products by region and country. Most large companies redact their name, so it is not a great use case for the data. The way around this is to track the movements of a company's product by looking at the trading via the finest granularity of HS code possible. Trade data can also be used as an indicator of inflation. Looking at sector-level imports/exports into and out of countries can be used to monitor changes in prices and inflation across various commodities.
Subcategory - Air Freight Data
The remaining 25-30% of global trade shipments of goods are done by air freight. The type of goods shipped by air are typically smaller products, goods with a short shelf life like produce or flowers, and also goods that need a fast time to market like fast fashion. COVID was a big disrupter to global trade and more goods began to be shipped by air freight over the period. More and more planes used for human transport began to be used for shipping commodities. Air freight can be carried out by dedicated planes but can also be done by utilizing the storage compartment of travel planes. In some instances over the COVID period, airlines removed seating to get more space for shipping goods. Data can be obtained on what is being shipped by air freight but not at the level of granularity of shipping data. HS code level details are not available. Many alternative data providers will have alternative data products on air freight shipments and destinations but details of what is on hold are generally not available.
Subcategory - Rail & Road Data
Road freight is widely used for the distribution and delivery of retail and other forms of cargo from and to various distribution centers (DCs). Road data is a type of alternative data that can help you understand supply chains that run through them, traffic information to understand delays, and you can acquire insights and analytics from location and traffic data from common supply routes on the road. Some location data vendors like SafeGraph can provide data on roads via their Transports & Logistics data offering. It is also possible to source trucking data where you can track trucking fleets. It isn't easy to source but vendors like American Trucking Association provide data like a monthly tonnage index based on surveys from their industry members.
Rail Transport is a commonly used mode of transport, especially in countries and continents with long transit times such as China, India, Russia, and parts of the USA. Vendors like Coriolis Technologies would include the Origin Country, Destination Country, Importer, Exporter, Product Description, Weight, Mode of transport, and container number information in their data. It is also possible to source rail traffic data that can provide insights into railroad activities and look at rail congestion for commodity trains and even passenger trains. Like trucking data, rail data can be sourced by railroad associations like the Association of American Railroads or by using the Rail Time Indicators Report which is compiled using over 15 key economic indicators like consumer confidence, and industrial production which can be used to get an insight on how healthy the economy is.
Subcategory - Shipping Data
The alternative data in this alternative data category consists of information factors that influence the performance of the cargo as well as the modes of transportation that were employed to move it. This type of alternative data includes the shipper and the consignee, the loading number, the date the shipment will depart, the date it will arrive, the weight of the cargo, and the cubic metrics and TEU. Additionally, this information gives the final destination of the shipment. The information regarding shipping provides an overview of the whole cost of transporting commodities as well as loading, unloading, and transferring the goods.
Approximately 75% of all trade globally is transported by ship. As the transport time can be 4-6 weeks the shipments are for products with a long shelf life and not for just-in-time use cases. Most alternative data providers report monthly data with a 4-6 week lag in the data, as it takes time to collate, aggregate, and clean the data.
Data Structure
- This alternative data is usually mapped to tickers and is also PIT.
- Depending on the data source, the delivery frequency can range from daily to weekly to monthly. Usually, the data is delivered in a week or by month with a lag of 4 to 6 weeks.
- Usually, these datasets have a long history, which can vary from five years up to 20 years.
- The data is delivered in all methods by the vendors including SFTP, platform, AWS S3, etc., but API is most common.
Compliance Considerations
It is important to note that there are no Material Non Public Information or Personally Identifiable Information concerns in this type of alternative data when the alternative data provider is in agreement with official sources and Governments or customs agencies, as these parties are primarily involved in major international trade agreements and the information is from public sources. There are some data vendors that source trade data from private sources e.g., from companies' shipping departments, or if the data vendor offers software to shipping brokers that captures and organizes emails and bill of lading data.
If that alternative data provider was not authorized to share this alternative data then there could be issues and so these types of vendors might require more stringent due diligence. In this instance, you need to ensure that you understand where the data is sourced from and how it was acquired. Data provenance is very important.