Westbound
America’s thirst for containerised imports from North Europe remained poor in January and February, averaging just 192,000 teu a month, 13% below 4Q12’s level, and 17% lower than that of the previous quarter. It seems that consumers already started preparing for worse times to come from the US Government’s budget sequestration, which finally took effect at the beginning of March.
The compulsory cut in Government spending means less funding of investment projects likely to lead to cargo growth, added to which both company and consumer spending power have been adversely affected by increased employment taxation. Various Government agencies, including Customs, still claim that imposed staff cuts will affect their ability to provide the same level of service.
In summary, there remains no sign of any lasting westbound trade growth, despite the IMF last week projecting economic growth of 1.9% in the US in 2013 – albeit down from its previous forecast of 2.1%. It appears that much of this will come from energy production (natural gas), which does not involve containerised cargo.
Ocean carriers’ response to the drop in cargo in the first two months of the year was to maintain westbound vessel capacity. No new services were launched, or radical changes made to existing schedules, so average monthly capacity of 243,520 teu was just 1.7% higher than in the previous quarter. Only two sailings were cancelled in January, followed by none in February and March. Moreover, the average vessel size deployed in all mainline services in March was only 4,574 teu, 3.4% higher than six months earlier, so little upgrading took place.
As a major ocean carrier executive recently remarked: ‘We are in wait and see mode, so do not expect a lot of changes ahead. However, as Maersk, MSC and Hapag-Lloyd have such a dominant position in the tradelane, the future is really in their hands.’
According to Drewry’s data, the three operated 56% of all mainline nominal vessel capacity in March.
MSC appears to be growing restless, as it has recently added Savannah and Port Everglades to its westbound schedule from Northern Europe to Balboa (Panama Canal) and Guayaquil (Equador), with the first vessel arriving in Savannah on 11 April. The service is run jointly with CSAV, and focuses on reefer cargo. MSC has a significant container terminal interest in Port Everglades.
OOCL is also reported to be seeking change, but between North Europe and the US Gulf/Mexico. Instead of taking slots on CMA CGM/SCAV’s Samex/Victory Bridge schedule, it will, from July, use the Grand Alliance’s GMX service, whose six vessels are all provided by Hapag-Lloyd. No reason has been given, but schedule reliability might be a factor, as it is an issue in the transatlantic at present. According to Drewry’s Carrier Performance Insight, only 76% of all vessels operating in the tradelane arrived within a day of schedule in November and December.
Eastbound
Cargo growth from North America to North Europe unexpectedly raised its head above the water in the first two months of the year, with the average eastbound monthly flow of 168,000 teu being 9% higher than in the previous quarter, or 5% higher than in 3Q 12. It still has a long way to go to get back to where it was at the beginning of 2012, however, as shown in the following graph.
The growth was unexpected as large parts of the EU, including the UK, are still hovering on the edge of a triple-dip recession. Unlike in the US, most EU member states remain determined to cut unsustainable budget deficits via a wide range of austerity measures, instead of printing money via quantitative easing.
As a result, the IMF now sees the Eurozone’s GDP contracting by 0.3% this year instead of the 0.1% reduction previously forecast, which should result in lower imports.
Average eastbound vessel capacity in 1Q13 was just 1.5% higher than during the previous three months. As in the westbound tradelane, no major changes were made to existing schedules, only adjustments to port pairs, with ocean carriers preferring to watch trade developments before moving any further.