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Trade from Europe to East Coast South America continues to outpace volumes moving in the opposite direction.
The latest container traffic statistics for the Europe-East Coast South America trade confirm the trend for a strengthening southbound market and a softening northbound trade. The latest figures from Datamar up to July show that southbound container volumes from Europe are doing very well, registering year-on-year gains in 11 consecutive months, with six of those months rising by at least 10%.
After seven months the southbound trade was up by 10% on the same period last year and on course to get close to the 2014 annual total after a couple of lean years.
Split by region of export, growth from the smaller Mediterranean market was strongest, rising by 14% to 135,000 teu after seven months. North Europe exports to ECSA grew by 9% to 333,000 teu over the same timeframe.
Shipments in the more reefer-oriented northbound trade have fared less well. Outbound ECSA traffic was down by 5% after seven months, not helped by heavy rains that shuttered the port of Itajai for about three weeks over May and June, disrupting the operations of at least 30 containerships that were denied access to the port and adding significant cost to exporters for cold storage.
Trade was already in decline before the extraordinary weather intervention, but caused the year-to-date trend to fall even harder after seven months to -5%. Just as with trade in the opposite direction, northbound trade is on course to match 2014 levels, the difference being that it will mark a retrograde step.
The trade data for July pushed the fast-growing southbound moving 12-month average up to 9.2%, but pushed the northbound rolling average down to -4.3%. The relatively small volumes being moved in this trade mean that the growth figures can distort the message somewhat. The physical volume changes are less striking; in the southbound market there are about 5,600 teu more containers on average being moved each month, while there are about 3,000 teu fewer moves per month in the northbound leg.
Four of the five main carriers (Hamburg Süd, Hapag-Lloyd, Maersk Line and MSC) that operate ships in this trade are currently undergoing a reshuffle of services and slot charter agreements. The net impact on slot capacity from all of this rationalisation will be minimal. However, the other big player in the trade, CMA CGM, will be adding capacity by introducing the seasonal North Brazil Express (NBX) loop later this month, deploying four 1,750 teu units.
The end result is that we estimate effective monthly capacity will reach 150,000 teu southbound and 100,000 teu northbound in October, representing roughly 10% more slots than in the same month one year ago.
The additional capacity will put pressure on fairly weak ship utilisation figures, which Drewry calculated averaged around 50% in the northbound leg and 70% southbound in the three months May-July.
Spot rates in the southbound trade have barely flickered in the past year, even when ship utilisation spiked in March when carriers voided sailings. Drewry’s Container Freight Rate Insight reported that spot rates from Rotterdam to Santos remain in the $1,000 per 40ft container range, while prices from Genoa to Santos are tracking about $200 lower.
There has been more movement in the northbound trade, where utilisation did pick up by a few points in June and July. The increase may also have been driven by equipment shortages resulting from the port closure at Itajai.
This trade still has a long way to go to recover the lost ground over the past two year. Tighter space in the weaker northbound leg could trigger more freight rate movement.
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