What Germany Recession Means for European Container Demand

Date: Friday, June 2, 2023
Source: Sourcing Journal

Falling container demand and consumer spending could have a disproportional impact on Europe during the August-to-October peak season, especially now the German economy is officially in a recession.

Germany‘s gross domestic product (GDP) dropped 0.3 percent in the first three months of the year, following a 0.5 percent contraction at the end of 2022, according to the country’s Federal Statistical Office. The economic decline could affect neighboring countries.

“We anticipate that the recession now in Germany will reduce the economic activity resulting from dropping consumer demand for goods and services, which will in turn impact the peak season demand this year,” said Christian Roeloffs, co-founder and CEO of Container XChange, an online marketplace and operating infrastructure for container logistics.

Roeloffs pointed out that sagging consumer demand and economic activity in Europe could lead to lower imports, affecting export-dependent economies and leaving them vulnerable to potential trade disruptions.

According to the latest Drewry World Container Index (WCI), costs per 40-foot container are 78 percent lower than the same week in 2022, declining to $1,685 from $7,648 in the year-ago period. On a weekly basis, the index declined 2 percent from the $1,720 per container calculated on May 18.

Europe was the biggest contributor to the year-over-year declines. Two of the eight major East-West trade routes surpassed the overall WCI spot freight rate plunge—both lanes from China to European ports.

On an annual basis, spot rates from Shanghai to Rotterdam tumbled 84 percent, the biggest drop of all trade routes, to $1,530 per container from $9,793 in the year-ago period. And from Shanghai to Genoa, rates sank 81 percent to $2,169 per container from $11,681 on May 19, 2022.

Overall, the average container price for 20-foot and 40-foot containers entering major Western European ports including Rotterdam, Antwerp and Hamburg—from all global destinations—is down almost half from 2021 totals, when demand for containers was at its peak. Interestingly enough, most of the rate declines for 20-foot containers had their steep decline from 2022 to 2023, while the 40-foot containers had a larger fall from 2021 to 2022.

The container logistics platform’s data indicates that port throughput within Rotterdam and Antwerp saw declines over the three-month period of January to March.

The Port of Rotterdam posted an 11.6 percent decline in container volume to 3.2 million TEU, a trend that started last year due to the elimination of volumes to and from Russia in the wake of the war in Ukraine. Antwerp-Bruges handled 3.1 million TEU in the first quarter, a 5.7 percent drop that was led by a nearly two-thirds decline in Russia-related cargo.

Drewry data indicates that year-over-year overall European port throughput declined 8.8 percent to an index figure of 96.5 points in March. The figure marks the second-lowest of the regions covered by Drewry’s Port Throughput Index, as well as the second-largest dip in port throughput.

The North American version of the index recorded the largest decline, a 23.9 percent year-over-year dip in March 2023 to 89.9 points, its lowest level since June 2020. Drewry said that the impact of the Chinese New Year holidays, coupled with weak demand and the ongoing concerns about the still unresolved dockworker contract negotiations resulted in weak throughput figures at many ports on the U.S. West Coast in March.

The West Coast’s two largest hubs, the Port of Los Angeles and Port of Long Beach, posted large year-over-year throughput declines of 35 percent and 30 percent respectively in March 2023.

Labor concerns have heated up within continental Europe and the U.K. as well, as challenges posed by rising inflation and the subsequent increase in the cost of living remain. As a result, these areas have witnessed labor strikes taking place this year across several European countries.

Countries such as France, Portugal, Greece, Germany and the Netherlands have experienced such strikes, causing disruptions at ports and significantly impacting cargo movement.

“The consequences of these strikes have reverberated through the transportation and logistics sector, particularly at ports, which are vital hubs for global trade,” Roeloffs said. “Disruptions in cargo movements can lead to delays, increased costs and logistical challenges for businesses relying on efficient supply chains. It further underscores the interconnectedness of various economic sectors and the importance of stable labor relations for sustained economic growth.”


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