Trans-Atlantic Spots Rates Hit 5 Year Lows

A normally stable trans-Atlantic route has seen spot rates deteriorate to 5 year lows, leaving shippers wondering whether there will see prices rise again before next year. Spot rates on exports from New York to Rotterdam fell to $422 for a 40-foot-equivalent (FEU) container on July 21 and remained there the following week, the lowest level since at least 2011, according to the latest data available on the World Container Index assessed by Drewry. Imports into New York from Rotterdam hit a five-year low of $1,821 in April, stayed there a few weeks, and had ticked up to $1,865 by July 28, the most recent available according to the U.S. exports to Northern Europe were down 9 percent year-over-year in May and exports to the Mediterranean down 12 percent.

The the dramatic slips in the rates have been linked to the low price of oil, overcapacity (soft demand) and weak economic conditions in the U.S., which have curbed imports, and in Europe, which has hurt exports. Meanwhile, the strong U.S. dollar has hurt exports to Europe by making them more expensive for foreign countries. The rate drops follow solid container volumes from earlier in the year, with exports to Northern Europe rising 4.3 percent through April, with import volumes increasing by 32 percent compared to the year before.

Normally consistent, analysts have said a series of factors on both sides of the ocean is undermining the typically steady trans-Atlantic trade route: concern over the fate of negotiations toward the Transatlantic Trade and Investment Partnership, the tepid economic growth of the Eurozone, growing fears of an imminent Italian banking crisis and perhaps most disconcerting, the U.K.’s unexpected June vote to quit the European Union. Mario Moreno, senior economist at IHS Maritime & Trade, believes “demand from Europe is very weak”. In the longer term, Moreno forecasts that container volume on the North Europe-U.S. route would grow 3.5 percent in 2016 to nearly 2.1 million 20-foot-equivalent units (TEUs), driven by solid demand for automobile parts and consumer goods. He expects exports to Europe to grow 5.6 percent in 2016 to nearly 1.5 million TEUs, based on a better-than-expected first-quarter performance. Moreno expects import volumes to rise 4.5 percent in 2017 and 5.3 percent in 2018, and exports to rise by 6.5 percent and 6 percent, respectively.

Source: JOC