Westbound transatlantic trade has been the star performer for container lines over the past year, a bright spot amid a global decline. Rates between Europe and the United States have been an anomaly, remaining well above those in trans-Pacific trade and, until recently, far exceeding pre-Covid-19 levels.
This premium still exists, but it is shrinking rapidly. European and East Coast spot rates continue to decline steadily, following the same pattern previously seen in other major transactions. The only difference is the time difference.
Import data explain the late fall across the Atlantic. Asian-American trade is dominated by consumer goods. These fell first. Euro-American trade is based primarily on building supplies and secondarily on beverages, furniture, and mechanical equipment (including automobile parts).
Demand for construction goods has held up longer than demand for consumer goods. Now the construction side is sinking.
Fritos Baltic Daily Index
The Freightos Baltic Daily Index (FBX) put average East Coast Europe prices at $3,081 per forty-foot equivalent unit on Thursday, down 44% year to date.
The premium versus pre-coronavirus prices on this trade narrowed to $1,022 per FEU.
At the beginning of this year, the difference was more than three times that. In early October, the premium to pre-coronavirus rates was six times higher than it is now, according to FBX data, at more than $6,100 per FEU.
Comparing the five-year European and East Coast FBX rate curve with the global FBX composite (a composite of all trades covered by FBX) shows how westbound transatlantic trade peaked later during the boom era and almost exactly parallels global trade. Downtrend with delay.
Catalogs Drury, Platts, Zenetta
Platts and Xeneta transatlantic spot rate reviews are close to FBX. Those at Drewry are much higher (which underscores how different indicator providers can show the same directional trend while publishing completely different numbers).
The Drewry World Container Index (WCI) Rotterdam-New York spot price assessment for the week ending Thursday was $4,806 per FEU, down 35% year-to-date. According to WCI, the pre-coronavirus premium is still a very impressive $2,504 per FEU – albeit about half the premium at the start of this year. The WCI spread versus pre-pandemic levels for the Rotterdam-New York rates reached $5,400 per FEU in early November.
As with FBX, the 5-year WCI chart shows that Rotterdam-New York spot rates follow the same global composite pattern but with a smaller peak and a lag of several months on the way up and down.
Platts assessed westbound transatlantic spot rates at $3,100 per FEU for the week ending April 21, down 11% week-over-week to the lowest level since April 1, 2022.
Sources told Platts that rates fell due to “reduced demand for European goods, increased energy costs and increased ship capacity to trade.”
Xeneta’s XSI-C Short-Term Interest Rate Index put Northern Europe and East Coast interest rates at $3,060 per FEU on Wednesday, down 23% month-on-month and 57% year-to-date. The XSI-C for this path has not been this low since March 2021.
Xeneta data shows that long-term contract rates on this route are also falling sharply. Long-term contracts for trade between Northern Europe and the East Coast averaged $4,750 per FEU as of Monday, the company said. Long-term interest rates on this path have not been this low since September 2021. Zenita expects long-term interest rates to fall further in May.
2022 Transatlantic Power Engine
US East and Gulf Coast ports have generally outperformed West Coast ports since the post-boom slowdown began. Redirecting cargo away from California ports has been a big driver, but it’s not the only driver. Imports from Europe – which account for about 20% of all US containerized imports – also played a role in the gains of ports on the East Coast and the Gulf.
The U.S. Census Bureau compiles import statistics based on customs data for metric tons of containerized goods. This data set shows that overall US total imports began to decline sequentially in August.
During the last five months of 2022, import volumes decreased by 3.2% compared to the period from August to December 2021. But the decline was not evenly distributed. US imports from Europe increased by 2.5% year over year during this period. Imports from non-European sources (mostly from Asia) decreased by 4.6%.
U.S. import volumes from Europe in 2022 were much higher than before the coronavirus, up 22% compared to 2019. The top five merchandise gainers by the Harmonized Tariff Schedule (HTS) were heavily weighted toward building supplies and home furnishings.
The amount of packaged portland cement and other cements rose the most, doubling in 2022 compared to 2019. The next largest increase was for gypsum and plaster, which more than tripled. The third biggest gainer by volume was ceramic paving and tiles, followed by electrical storage batteries, then furniture.
US imports from Europe remained strong last January, but declined in February, falling by 22% on a monthly basis and approaching pre-Covid-19 levels.
Imports of construction materials decline in February
US imports from Europe typically decline in February compared to January, but the decline this year was steeper than usual. The decline in imports in February (latest census data available) was largely driven by lower US demand for European construction supplies.
Looking at the four largest declines by HTS code in February versus January, Portland cement and other cements decreased by 149,480 tons or 62%. Sawn lumber decreased by 51,188 tons, or 49%. The price of gypsum and gypsum decreased by 53% to 46,435 tons. The prices of stone tiles, marble, granite and limestone decreased by 45% to 38,667 tons.
The flow of construction materials that boosted the transatlantic market in 2022 is now declining. Not surprisingly, freight rates between Europe and the East Coast continue to decline.
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