Trans-Atlantic Spot Rates Up As Trade Lane Blunted By Bottlenecks

Spot rates on the trans-Atlantic trade lane remain three times higher than 2019 levels, and contract rates double, as port congestion and lengthening delays offset an injection of capacity into the trade by container carriers.

Demand on the head-haul North Europe-North America trade lane, while 10 percent higher year over year, has largely tracked 2019 volume through August this year, with 1.6 million TEU carried westbound in the first seven months, up 1 percent compared with the pre-pandemic period, according to data from PIERS, a sister company of within IHS Markit.

But matching the demand with capacity is proving impossible, with carriers struggling to maintain schedules as congested ports delay ships and slow the turnaround of equipment. Carriers have been steadily increasing the sequential monthly capacity deployed on the trans-Atlantic since March, with just over 60,000 TEU added to the trade by August, according to carrier-schedules platform eeSea.

The added capacity has had no effect on rate levels, and with the trans-Atlantic trade lane heading into its historically busy fourth quarter when US importers load shipments for Christmas, there is little chance of rates easing.

“Ships are fully booked, and demand will remain strong,” Tobias Sopalla, trade manager export, Western Hemisphere, at Hellmann Worldwide Logistics, told “Most of our clients book their volume for the Christmas period in September and October with the departures from Europe in November. Our clients are forecasting strong demand into the first half of 2022.”

Peter Sand, chief shipping analyst at BIMCO, said cargo-carrying capacity on the trans-Atlantic had increased 21.4 percent in the 12 months ending July 1, but it was doing little to lower rate levels.

“Capacity is massively underutilized on most trades these days,” Sand told this week. “In addition to the ripple effects from stretched global supply chains, strong demand from US consumers also contributed to the hike in spot rates on this trade.”

Rates of 32 days or less on the North Europe-North America route reached $4,003 per TEU this week, close to 300 percent higher than in 2019, according to rate benchmarking platform Xeneta. The rate for contracts greater than three months was up 172 percent over 2019 levels at $2,580 per TEU.

The trans-Atlantic is being affected by the other east-west trade lanes, especially the heavily disrupted trans-Pacific, Sopalla explained. Shippers are doing what they can to avoid congested ports on both the trans-Pacific and Asia-North Europe trades, where lengthy vessel delays and inland logistics bottlenecks are effectively cutting capacity.

“We have seen clients routing cargo via the US East Coast or Houston since the beginning of the year to avoid congestion on the US West Coast,” he said. “This is causing a lot of problems for our clients because the bigger shippers are looking for alternative solutions to the US, and that is filling up ships very quickly on the trans-Atlantic.”

Sopalla said Chinese New Year would also have an impact on the trans-Atlantic, and shippers should expect carriers to reposition vessels to the higher-priced trans-Pacific and Asia-Europe trades.

"Carriers will be looking at how best they can utilize their container fleet and will send containers to the trade lanes where they can earn the most money, which is now Asia,” he said. “The effect on the trans-Atlantic is that rates will have to increase, otherwise the trade lane will not get any empty containers to be shipped to the US.

“Rates will continue to increase to keep up with rates on the trades out of Asia,” Sopalla added. “We have seen this trend over the past year where the higher the rates are on a trade lane, the greater the incentive for shipping lines to move empty containers to that trade.”

Source: Journal of Commerce