Industry News

Transatlantic Trade Lane Between North America & Europe

Transatlantic Trade Lane Between North America & Europe

Significant reasons have caused delays and ocean freight increases which have impacted the transatlantic trade lane between Europe and North America. Jan Hansen, North American Trade Lane Manager of Alfons Koester, Scarbrough’s exclusive German partner, was happy to give us an update from a German perspective.  See below:

german rates

 

Germany is typically an export orientated country and as long as the international trade industry worldwide is in a good situation, the economy is growing.  Jan says, “We had some interesting customer meetings at the end of 2018, more specifically those in the chemical and raw material industry, that mentioned they had seen a downturn in 2018.  Usually these industries are a bit ahead of time because they deliver the material for the worldwide economy, so you can expect what can follow.”

Jan continues,

“To our surprise these customers started 2019 with higher volumes than expected, and several signed 2 years contracts with their buyers. So the bad scenario which they saw on the horizon was not as bad as they thought…But the indicators for 2019 were a bit lower as expected in general and so the year started for us good but not as great as it could be. The German export volume direction North America out of North Europe was in a good balance, the rates were on a good level and everyone was in a good mode for 2019. Growth and transport costs were okay.

I think it was in beginning of February when President Trump made an announcement that would affect the automobile industry.  Nobody ever saw this report or know what this Report includes but it took only 24 hours to screw up the transport industry from Germany to North America. Before Trumps announcement, the vessels were booking well and the forecast was as usual.  It would take around 1 to 2 weeks to get space on the vessel. After the Trump’s announcement, the European shippers stopped their production for the Asian Market and only focused on the US Market driven by the fear of high import tariffs from the EU. Within 2 days the vessel forecast jumped from 1 to 2 weeks up to 6 weeks in advance causing very overbooked vessels.

This scenario also brought us the highest GRI’s for North America since a long time – we are talking about USD 500 or more for 40’ containers.  We have seen many shippers pay even pay $1000 USD over the GRI rate only to get a confirmed booking on a short note.

So our hope was that the actual situation will get better during Quarter II or beginning of Quarter III.  Furthermore, IMO 2020 will be in place by the first of January 2020 and that will drive the ocean industry crazy in the second half of 2019. Reason why – all trade vessels have to go to the shipyard before they are allowed to bunker the new fuel which is law by the first of January 2020. So during the second half of this year, we will see a dramatic amount of blank sailings due to this fact. This will definitely keep the vessel space tight and will further drive the rates up.

So what will happen in the near future is hard to tell. If we will face a tariff war with the U.S., nobody can tell or indicate, but if this will happen, the rates will go down even faster as they climbed over the last month. If this will not happen, the vessel space will be limited due to IMO 2020 and the rates will climb further.

 

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