Unemployment rates in Europe are higher than in the US, affecting consumer spending and retail sales in Europe more so than America. This is reflected in decreasing container shipping rates from Asia to Europe, while rates to the US are increasing. Carriers are cutting capacity on Asia-Europe routes and slowing ships to reduce costs, while imports to the US are expected to rise significantly in the lead up to the holiday season as retailers stock up, leading to a stronger peak season for Asian exports to North America than Europe.

1. A Split Peak Season?

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5. For those following box carrier
rates and vessel scheduling,
this might not be the most
joyous of holiday times for
everyone. The difference
between US and EU economic
growth is reflected in the
container rates from Asia to
each market.

6. Although EU growth exceeds US
growth 2.3 % vs 2.2%, the
unemployment numbers make all the
difference. Eurozone unemployment
is 9.1%, with headed by Spain and
Italy’s 17%+.

7. These stubborn EU unemployment numbers continue to affect
EU and UK retail sales giants such as Carrefour and Marks &
Spencer, while US unemployment numbers are 4.3% result in
rising sales figures at US retail giants Target, Walmart, Macy’s
and on-line monster Amazon.
This disparity is reflected in Asian rates and volumes, which are
decreasing to the EU while increasing to the US.

8. Contrasts in
Short-Term Rates

9. In mid-July 2017 to end
of September 2017,
short-term rates for a
40-foot container on the
Asia to main European
ports declined from USD
1880 to USD 1633, a fall
of some 10%. Contrast
that with developments
in the US. Here the
short-term rates, across
the same period, climbed
from USD 1430 to USD
1611, an increase of
13%.

10. Maersk, the world’s
largest container line,
has already cut
capacity on their
Asia-Europe routes by
10% and might cut
more in the 4th Q, CEO
Soeren Skou said last
week. He also forecast
a 3% full year (2017)
Asia-North America
volume increase, as
compared to a 3-4%
Asia-EU decrease.

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12. Unemployment Causing Low
Economic Confidence

13. The combination of Brexit fears between the UK and EU, along
with Spain, Italy, and the UK bumping along at recessionary
economic levels have resulted in EU economic confidence index
in August falling to its lowest level since 2009.
Since retailers earn 25-40% of their annual sales in the
November-December timeframe, this slump is problematic both
for the EU/UK retailers as well as the carriers servicing those
markets.
Both the Ocean Alliance and THE Alliance recently announced
they would each be cutting cut one of their Asia-European runs,
which reduces eleven weekly runs to nine.

14. Container Imports on the Rise

15. This doesn’t solve the current carrier overcapacity or the EU’s
lack of demand issues, but it does serve to keep the current box
rates up at their current strong levels until the larger economic
issues of cargo-container supply-demand become more
balanced.
Maersk is among carriers said to be raising rates on Asia-U.S.
routes as current three-month-high consumer confidence and job
growth rates have convinced the major retailers to be fully
stocked prior to the expected Thanksgiving-Christmas rush.

16. Carrier cost-cutting will affect
the all-important peak-season
arrival times; Bloomberg
reported the carriers have
reduced vessel speeds 10%
from last year in order to
reduce fuel consumption.

17. The Washington-DC based National
Retail Federation announced that U.S.
retailers may boost container imports
7.3% this month and 13% in October
(from same time 2016) as they stock
up for the holidays, a fact noted by
several of the major carriers.

18. The U.S. will see a mild growth in shipping
demand in the third quarter. We are
seeing some of the peak from Asia to
U.S., but basically no peak for Asia to
Europe.” In an interview, Maersk’s Skou
was more succinct “Christmas will come
to America, but probably not to Europe.
- Wan Min, executive vice president at China
Cosco Holdings Co