European imports have yet to show any signs of the slowdown affecting major economies in the region.
Import container volume from Asia grew 7 percent year over year in the first quarter, with March shipments making a strong comeback after the seasonal February slump, according to data from Container Trades Statistics (CTS).
After a 15 percent year-over-year decline in February, westbound Asia-Europe volume rose nearly 24 percent in March. While the March growth appears spectacular, the comparison is slightly misleading, as the annual seasonal decline in volume after Chinese New Year was spread over February and March in 2018. Because of a later Lunar New Year in 2019, the effects were contained in February.
Rotterdam and Antwerp, Europe’s busiest container ports, both reported strong growth in first-quarter volume.
Rotterdam’s first-quarter throughput was up 7.3 percent compared with the same period last year. The port handled 250,000 more TEU from January through March than during the first quarter of 2018, a result the port attributed to growing demand for feeder services as alliance members concentrate their mega-ship calls in Rotterdam.
Antwerp has yet to release detailed first-quarter figures, but the port said in a statement it reported “the strongest month of March ever,” outperforming even March 2018, which held the previous record for the month.
“[C]ontainer throughput continues to grow despite the weakened economic outlook,” said Jacques Vandermeiren, CEO of Antwerp Port Authority.
However, there are conflicting indicators that may have positive or negative effects on container trade. IHS Markit predicts Europe’s economy will expand by about 1.5 percent in 2019, but that is still down from a 1.8 percent growth rate last year. Adverse economic and political factors behind the continued deceleration in growth include the negative impact of trade tensions on manufacturing and exports, and the appreciation of the euro against most currencies except the US dollar.
On the other hand, despite the economic slowdown, IHS Markit has forecast a 3 percent increase in volume on the Asia-Europe trade in 2019, followed by a 3.2 percent bump in 2020 and a further expansion of 3.6 percent in 2021.
Another negative factor to consider is IHS Markit’s latest European purchasing manager’s index (PMI) that found the automobiles and auto parts sector remained in a downturn through April, as output and new orders fell to a 76-month low.
Other sectors to record falling output in April were primarily in manufacturing, notably metals and mining and chemicals. European manufacturing posted the strongest decline since November 2012.
Rates on the rise
Evidence that the weakening economic activity is putting the brakes on volume growth will only be seen when the April data from CTS is released in early June. But so far, any drop in demand is not being reflected in the spot market, which suggests that either volume has continued to grow despite the economic slowdown, or effective capacity management by carriers on the trade is compensating for any declining volume.
The Shanghai Shipping Exchange’s Shanghai Containerized Freight Index (SCFI) was closed in early May for the week-long labor holidays, but the index’s April 26 spot rate of $717 per TEU from Shanghai to North Europe was 12.4 percent higher than during the same week last year. Analysis of weekly rate movements recorded on the JOC Shipping & Logistics Pricing Hub shows that for much of the year, the spot market has managed to remain above the levels recorded in 2018.
Given the size of the Asia-Europe trade and the mega-vessels that operate on those routes, managing overall capacity is no easy task. As of the end of 2018, Drewry found the average size of container ships deployed between Asia and Europe had increased 6 percent from the start of the year to 15,000 TEU, by far the largest of any trade.
Drewry has forecast that the average will rise again this year, thanks to the approximately 460,000 TEU of ultra-large container vessels (ULCVs) scheduled for delivery and another record amount of mega-ship tonnage arriving in 2020, when ULCVs with a combined capacity of 620,000 TEU will hit the water.