Date: Monday, May 1st, 2023
The trans-Atlantic westbound trade has been a star performer for container lines over the past year, a bright spot amid a global slide. Europe-to-U.S. rates have been an outlier, staying far higher than those in the trans-Pacific trade and — until recently — far exceeding pre-COVID levels.
That premium is still there, but it’s shrinking fast. Europe-East Coast spot rates continue to steadily decline, following the same pattern previously seen in the other mainline trades. The only difference is a time lag.
Import data explains the belated fall of the trans-Atlantic. The Asia-U.S. trade is dominated by consumer goods. These fell first. The Europe-U.S. trade is primarily driven by building supplies and secondarily by beverages, furniture and mechanical equipment (including auto parts).
Construction-goods demand held up longer than consumer-goods demand. Now the construction side is sinking.
Freightos Baltic Daily Index
The Freightos Baltic Daily Index (FBX) put average Europe-East Coast rates at $3,081 per forty-foot equivalent unit on Thursday, down 44% year to date.
The premium versus pre-COVID rates on this trade has shrunk to $1,022 per FEU.
A comparison of the five-year FBX Europe-East Coast rate curve to the FBX global composite (a composite of all trades covered by FBX) shows how the trans-Atlantic westbound trade crested later during the boom era and is almost exactly paralleling the global trend downward with a delay.
Drewry, Platts, Xeneta indexes
Trans-Atlantic spot-rate assessments from Platts and Xeneta are close to the FBX. Those from Drewry are significantly higher (underscoring how different index providers can show the same directional trend yet publish very different numbers).
The Drewry World Container Index (WCI) Rotterdam-New York spot rate assessment for the week ending Thursday was $4,806 per FEU, down 35% year to date. According to the WCI, the premium versus pre-COVID is still a very impressive $2,504 per FEU — albeit around half the premium in the beginning of this year. The WCI spread versus pre-pandemic levels for Rotterdam-New York rates was as high as $5,400 per FEU in early November.
As with the FBX, the five-year WCI chart shows Rotterdam-New York spot rates following the same pattern as the global composite but with a lower peak and a multi-month lag on the way up and down.
Platts assessed trans-Atlantic westbound spot rates at $3,100 per FEU for the week ending April 21, down 11% week on week to the lowest level since April 1, 2022.
Xeneta’s XSI-C short-term rate index put North Europe-East Coast rates at $3,060 per FEU on Wednesday, down 23% month on month and 57% year to date. The XSI-C index for this route has not been this low since March 2021.
Xeneta’s data shows long-term contract rates on this route are also declining steeply. The company said long-term contracts for the North Europe-East Coast trade averaged $4,750 per FEU as of Monday. Long-term rates in this lane haven’t been this low since September 2021. Xeneta expects long-term rates to drop further in May.
2022 driver of trans-Atlantic strength
U.S. East and Gulf Coast ports have generally outperformed West Coast ports since the post-boom slowdown began. Rerouting of cargo away from California ports has been a big driver, but not the only one. Imports from Europe — which comprise around 20% of all U.S. containerized imports — have also played a role in East and Gulf Coast port gains.
The U.S. Census Bureau compiles import statistics based on customs data on metric tons of containerized cargo. This dataset shows that overall U.S. imports overall began falling sequentially in August.
During the last five months of 2022, import volumes fell 3.2% versus August-December 2021. But the decline was not evenly spread. U.S. imports from Europe increased 2.5% year on year during this period. Imports from non-European sources (mostly Asia) decreased 4.6%.
The volume of bagged Portland cement and other cement rose the most, more than doubling in 2022 compared to 2019. The next-largest increase was for gypsum and plasters, which more than tripled. The third biggest volume gainer for ceramic paving and tiles, followed by electric storage batteries, then furniture.
U.S. imports from Europe remained strong this January, but plunged in February, declining 22% month on month and approaching pre-COVID levels.
Building-supply imports fall in February
U.S. imports from Europe typically fall in February versus January but the decline this year was steeper than usual. The drop in imports this February (the latest month Census data is available) was heavily driven by declining U.S. demand for European building supplies.
Looking at the top four decliners by HTS code in February versus January, Portland cement and other cement plunged 149,480 tons or 62%; sawn wood fell 51,188 tons or 49%; gypsum and plasters declined 46,435 tons or 53%; and stone tiles, marble, granite and travertine fell 38,667 tons or 45%.
The flow of building materials that buoyed the trans-Atlantic market in 2022 is now pulling back. It’s no surprise Europe-East Coast freight rates continue to fall.