East/West: North Europe-North America

North American appetite for European goods remains strong, but recession fears have dampened trade in the opposite direction.

Traffic to both the US and Mexico from North Europe saw steep increases in October compared with September. Trade to the US increased on this route by 17,000 teu (up nearly 11%) to 175,000 teu and traffic going to Mexico was up 7,000 teu (up 28%) to 32,000 teu on the previous month. Canada did not appear to benefit from this surge, remaining unchanged at 55,000 teu. Overall, the trade saw a year-on-year increase of 10% in container numbers; taking a 12 month rolling average (Figure 3) to provide a more realistic picture of demand growth, we see that the number of containers carried has grown by 6%.

Figure 1
Westbound North Europe to North America Container Traffic (’000 teu)

Source: Drewry Maritime Research (www.drewry.co.uk), derived from PIERS (www.piers.com) and CTS (www.containerstatistics.com)

Eastbound, however, saw the slow downward trend in demand continue, seen since the late summer, particularly from the US and Mexico. Month-on-month, North Europe-bound freight from the US declined by 3,000 teu (down 2.7%) to 110,000 teu and traffic from Mexico fell by 1,000 teu (down 5%) to 18,000 teu. The bright spot on this trade came with traffic from Canada to North Europe, rising 6,000 teu (up over 19%) to 37,000 teu.

Year-on-year the statistics show an overall decline on this trade lane of some 9%, but a rolling 12 month average (Figure 3) shows a 1.4% increase – but nevertheless, still on a downward-trending slope.

With most of the Christmas deliveries now complete, volumes on the westbound route are likely to see a fall; that said, they will remain higher than might otherwise be expected while congestion on the west coast continues. Some uncertainty exists over how much traffic diverted to the east coast North American ports will stick, even after these congestion issues are resolved. The eastbound traffic volumes are expected to remain flat or fall further in the coming months especially while Europe’s major economies continue to battle against recessionary pressures.

Figure 2
Eastbound North America to North Europe Container Traffic (’000 teu)

Source: Drewry Maritime Research (www.drewry.co.uk), derived from PIERS (www.piers.com) and CTS (www.containerstatistics.com)

Figure 3
12-Month Rolling Average of North Europe to North America Container Traffic (% change on previous year)

Source: Drewry Maritime Research (www.drewry.co.uk), derived from CTS (www.containerstatistics.com)

Despite the uptick in traffic on the westbound route from North Europe to North America, shipping capacity available to meet the demand fell slightly by some 3,000 teu to just under 248,000 teu (down 1.3%) in October. A small 2% rise in container carrying capacity has been recorded for November, however, taking the total available capacity to 251,500 teu. This available capacity is almost exactly where it was a year earlier in November 2013.

In January, CMA CGM will start a new service called Liberty Bridge that will call Antwerp, Rotterdam, Bremerhaven, Le Havre, New York, Norfolk, Savannah, Charleston, New York and back to Antwerp. The new service will reportedly use ships of about 1,700 teu, which would be some of the smallest in the trade, increasing the trade’s effective capacity by around 2%.

Figure 4
Westbound North Europe to North America Capacity (’000 teu)

Source: Drewry Maritime Research (www.drewry.co.uk)

The trouble for shipping lines on trades which are imbalanced is that it is difficult to increase capacity in one direction to match demand while trying to manage capacity on the smaller-volume leg. The North America-North Europe trade lane is no different in this respect.

Figure 5
Eastbound North America to North Europe Capacity (’000 teu)

Source: Drewry Maritime Research (www.drewry.co.uk)

With demand outstripping supply of container carrying capacity on the westbound lane, the estimated utilisation levels of ships in October increased by 11 percentage points to 106%; suggesting cargo roll overs for a few ships. Freight rates on the benchmark route from Rotterdam to New York (according to the Drewry Container Freight Rate Insight) reflect this high utilisation factor, rising by $20 per feu in October to $1,870 per feu and a further $30 in November.

Figure 6
Westbound North Europe to North America Utilisation v Rates

Sources: Drewry Maritime Research (www.drewry.co.uk); Drewry Container Freight Rate Insight (www.drewry.co.uk/cfri)

In the opposite direction, October saw a small increase in demand but a larger increase in shipping capacity holding down the vessel utilisation rate at 76%. The rates reflected this market situation with a fall of $30 to $980 per feu in Octover, followed by another drop of $40 in November.

Figure 7
Eastbound North America to North Europe Utilisation v Rates

Sources: Drewry Maritime Research (www.drewry.co.uk); Drewry Container Freight Rate Insight (www.drewry.co.uk/cfri)

Table 1
North Europe to North America – Estimated Monthly Supply/Demand Position

Notes: *Based on effective capacity after deductions are made for deadweight and high-cube limitations and then again for out-of-scope cargoes, ie. those relayed to areas outside the range. Where relevant,operational capacities have also been adjusted for slots allocated to wayport cargoes. Data subject to change
Source: Drewry Maritime Research (www.drewry.co.uk)

Our View

With only marginal changes to shipping capacity, Transatlantic freight rates have remained relatively steady and that situation is not expected to change in the near future.

Source: Drewry Maritime Research (www.drewry.co.uk/ciw)