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Container Shipping & Trade

Container Shipping & Trade

Transatlantic: cascading could topple the balance

Fri 23 Feb 2018 by Rebecca Moore

Transatlantic: cascading could topple the balance
Montreal's hinterland reach into key US Midwest regions is an attraction for cargo from north Europe

Transatlantic: cascading could topple the balance

The threat on the horizon of this mature trade is if there is a higher rise in supply versus demand, pressuring freight rates, reports Dean Davison*

The transatlantic North Europe trade links key ports in the Hamburg-Le Havre port range and UK with the east and west coasts of North America. Between January 2017 and January 2018, the route has developed:

• US East Coast – a total of 445,190 TEU slots in January 2018, giving an average vessel size of 4,497 TEU, with largest units at 8,586 TEU. This reflects growth since January 2017 when 393,664 TEU were offered, with average/largest ships of 4,631 TEU/8,814 TEU respectively.

• US West Coast – limited activity of just 49,355 TEU slots offered in January 2018, reflecting no change on the 2017 position. The average ship size remains static at 4,936 TEU, as does the figure for the largest units of 5,087 TEU (even though these are no longer limited by the Panama Canal).

The transatlantic trades operate relatively small vessels and, with the current orderbook focusing strongly on ultra large container vessels, little impact on ships deployed on this trade is anticipated from those deliveries. However, there is a possibility of some minor upsizing of units through the cascade process, which will pressurise rates.

Loaded box volumes for the whole transatlantic trade, to both East and West Coasts of North America, saw demand increases of around 6% per annum between 2013 and 2017, with the US East Coast remaining dominant. For 2018, total loaded box activity is expected to increase by 5% to surpass 4.6M TEU, with low/high variables seeing a small differential of between 4.5M and 4.8M TEU.

Volume growth in both sub-routes is continuing, but there is no shortage of vessel space. This was reflected in spot rates during 2017, which softened by around 7% compared to 2016 for the head-haul trade from North Europe to US East Coast, although the smaller return leg remained firmer as good US export demand continued.

The 2018 position in the head-haul route is unlikely to see spot rates continue to be eroded to this extent, as demand improves and increases vessel utilisation. Nevertheless, vessel upgrading could threaten this position.

Alliance changes

Stability of capacity and cargo demand is expected to remain in the transatlantic for 2018. The new mega alliances that were launched in 2017 will bring some structural amendments to services in Q2 2018.

As part of its portfolio of 33 global services and 250 vessels, THE Alliance has announced a total of seven dedicated strings covering both sub-routes in the transatlantic:

• AL1, AL2 and AL3 link North Europe with the North Atlantic ports.

• AL4 is a dedicated service from North Europe but running into the US Gulf and Mexico.

• AL5 sails from north Europe, via Panama Canal to West Coast North America, running as far north as Vancouver.

• AL6 and AL7 dedicated Mediterranean loops to North Atlantic and South Atlantic ports.

While exact sizes of ships are yet to be announced, it is assumed that existing-sized units ranging from 4,200 TEU to 5,000 TEU will again be used.

These changes will follow cancelled sailings throughout January, notably by THE Alliance (AL2, AL4 and AL6 services) and Ocean Alliance (TAT1 and TAT2 strings). Cancelling sailings is an unusual trend for this trade but does indicate that there is a threat of excess vessel supply related to demand – a view further endorsed by the relative lack of additional vessel space expected to be added.

There has been relatively little change among the major operators in the transatlantic trades – unsurprisingly, given the mature nature of the routes. Linking north Europe to US East Coast, Maersk Line, NYK Line, MSC, Hapag Lloyd and CMA CGM remain the biggest suppliers of vessel TEU slots, although NYK Line, MOL and K Line also run additional, smaller services to the West Coast. The forthcoming alliance changes are not expected to greatly alter the status quo.

Germany powerhouse

Looking at the countries that are leading the movement of goods on this trade, Germany continues to drive the transatlantic North Europe route, with a solid 2018 expected. Meanwhile, Italy has a primary role in the transatlantic Mediterranean trade.

Based on the most recent data available (YTD November 2017), the following synopsis of activity for loaded containers is applicable for the transatlantic North Europe route:

• Leading load country is Germany, reaching almost 793,500 TEU.

• Belgium is second largest, with almost 349,000 TEU.

• The Netherlands is third biggest, with 247,000 TEU.

• These countries are reflective of key container ports in the region – Hamburg, Antwerp and Rotterdam.

The leading unloading ports in North America on this trade route for the same period were:

• New York/New Jersey with 532,200 TEU.

• Montreal with almost 329,700 TEU.

• Charleston with 256,650 TEU.

The highest-volume ports are noted for retaining long-standing deep connections with North Europe and the transatlantic container trades.

The growth of demand from Germany to the US reflected a year-on-year increase of 4.5% in the November 2017 YTD figures, indicative of the trade overall. The country also noted an increase in activity to Mexico, rising 13.3% (to just over 127,400 TEU) so a growing market is being served.

Any possible political uncertainty after governmental elections in 2017 did not appear to weaken development of the German economy. Continued growth into 2018 has occurred due to a strong labour market and low interest rates. Household expenditure, supported by rising wages, will fuel further growth in 2018, although the strong euro could impact export potential. IMF GDP growth estimates for 2018 of 2.3% are noted.

Other strong year-on-year growth to November 2017 is seen from Poland to the US (up 24.8%) and from Belgium to Canada. Poland enjoyed a buoyant Q4 2017, driven by rising industrial production. With the new government also gaining a vote of confidence in Q4 2017, further positive economic developments are anticipated for 2018, with GDP potentially rising by 3.8%.

A deteriorating relationship between the US and the EU remains the largest potential political challenge that could yet impact economic growth.

For the link between Belgium and Canada, ostensibly cargo into Montreal, this port’s ability to continue to improve its hinterland reach into key US Midwest regions remains an attraction for cargo from north Europe. In 2017, Montreal’s total throughput surpassed 1.5M TEU and continued investment in terminal facilities, maintaining good access on the St Lawrence River and the unique trade dynamics offered (in which ships can gain a highly balanced full discharge, full load, operation) will continue to appeal.

For the transatlantic Mediterranean routeing, Italy, Spain and Turkey remain the biggest locations for loaded boxes moving to North America. Italy is the dominant country, with just over 496,000 TEU in the YTD November 2017 period, with Spain (185,000 TEU) and Turkey (170,500 TEU) some way behind.

There were positive economic trends in Italy during 2017, with rises in fixed investment and accelerating industrial production. In Q4 2017, total country exports were reportedly up 10% year-on-year, with strong demand for metals/metal products. For 2018, some concerns exist over consumer spending and pressure remains on the banking sector. Planned national elections in March could further dampen development, although IMF projections of economic growth of 1.5% are noted.

Leading unload ports for Mediterranean cargo for YTD November 2017 are New York/New Jersey (almost 362,300 TEU), Savannah (109,500 TEU) and Houston (just under 85,000 TEU). These are relatively small volumes, but reflective of calls at key ports in each sub-region of North Atlantic, South Atlantic and US Gulf, respectively.


How US East Coast ports are preparing for bigger ships

At berth water depths and known plans - selected US East Coast container ports


Current depth (m)

Key changes


11.9 – 16.8

None confirmed, but deeper water up to 16.8 m exists

New York/New Jersey

12.2 – 15.2

“50ft deepening project” completed 1 September, 2016 according to US Army Corps of Engineers


11.0 – 15.2

No depth changes but width for safety issues – due for completion from 2018



Southern Elizabeth River channel only – 10.7/12.2 m deepening to 12.2/13.7 from 2018 (earliest) – benefits Portsmouth Terminal, others already at 15 m+


12.3 – 13.7

Dredging commenced (October 2017) for 16.2 m – due within 40-76 months


12.8 – 14.9

Savannah Harbour Expansion Project (SHEP) – 14.3-14.9 m estimated to be available by 2019


15.3 – 16.0

Recently completed dredging to offer 15.2-15.8 m

Notes: Tidal depths are excluded.

Source: ClipperMaritime

*Dean Davison is a consultant at ClipperMaritime. Please see ClipperMaritime Horizons Container February 2018 newsletter, for more on this trade

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