Container volumes on the Asia-Europe trade jumped more than 11% in April, driven by large increases in demand that continued across the east and west Mediterranean lanes for a second consecutive month, according to new data from Container Trades Statistics (CTS).
A total of 1.44 million TEUs were shipped westbound in April, with the North Europe share rising 2.4% year over year to 882,000 TEUs. But it was, once again, on the Mediterranean trade lanes where the significant increases were reported.
Containerized imports to the East Mediterranean and Black Sea rose 38.5% year over year to 296,218 million TEUs in April, with West Mediterranean volume up 21.7% at 267,537 TEUs. That follows an 8% increase in Asia-West Med volume and a 39% increase in East Med imports in March.
“It is remarkable that the January to April volume from combined Asia to North Europe and the Mediterranean is down just 1.3% compared to the same four months last year when the Asia-Europe trade was performing strongly,” CTS CEO Nigel Pusey told the Journal of Commerce.
Carriers and forwarders are also reporting modest increases in May bookings from European importers, attributed to companies replenishing inventory after months of destocking. They are reading the numbers as confirmation that the green shoots of demand are emerging on Asia-Europe, with growing expectations of an actual peak season in the third quarter.
“April was a tipping point for AIT’s ocean import volumes from Asia to Europe, with the trend continuing in May,” Mario Cavallucci, vice president of Europe operations at AIT Worldwide Logistics, told the Journal of Commerce.
“The company anticipates that container counts from Asia to Europe will normalize for the remainder of 2023, including a peak season in Q3 driven by decelerating inflation and lower inventories,” Cavallucci added.
Even though the import percentage increase to North Europe — which handles 60% of all Asia-Europe trade — was in the low single digits, the fact that the year-over-year volume was now rising left Hapag-Lloyd CEO Rolf Habben Jansen in an optimistic mood during a press briefing earlier this week.
“We see that 2023 is starting to approach last year’s volume, and I think May and June will not be that weak,” he told reporters. “With a normal peak season, we are going to see a recovery in the second half of the year.”
Markus Panhauser, senior vice president for ocean freight/Europe at DHL Global Forwarding, agreed the market was showing signs of a recovery with the service provider’s May volumes at last year’s level.
“Feedback from the industry is that the stock levels of the retailers are melting, and customers have started the replenishment,” he said, adding that the inventory overhang was leading to products being heavily discounted, and consumers were taking advantage.
Peter Sand, chief analyst at rate benchmarking platform Xeneta, said the difference between freight rates and volume on Asia to North Europe in April 2022 compared to this year was striking.
Xeneta data shows Asia-North Europe rates in April last year started the month at $14,400 per TEU and ended at about $13,000/TEU. Despite volume this April rising 2.4% year over year, rates through the month were about $2,500/TEU.
An abundance of capacity caused by the end of port congestion in Europe, new ship deliveries and improving carrier schedule reliability were keeping a lid on rate levels despite the volume increase, Sand noted.
“It is positive to see that that European demand is recovering, and while liner operators are no longer cutting speed on the main trade, they are still deploying more ships, so capacity is there,” he said.
Much of that capacity is from Mediterranean Shipping Co., which reinstated its Dragon service between China and the Med that was discontinued in March 2020 at the outset of the COVID-19 outbreak.
The service had been offered as part of the 2M Alliance under the AE-20/Dragon label, but as MSC unwinds its alliance with Maersk, it will operate the standalone service using nine 13,000-TEU ships. Restarting the Asia-Mediterranean loop after three years enables MSC to utilize its abundance of capacity — the carrier has an order book of 1.8 million TEUs — in a trade that is more attractive than North European destinations.
While optimism builds in some quarters, not all forwarders believe the Asia-Europe trade is heading for a normal peak season, citing considerable uncertainty over demand as Europe struggles with high inflation and a cost-of-living crisis.
Some forwarders contacted by the Journal of Commerce noted there is little improvement in demand indicators and volume growth to North Europe was marginal. As a Germany-based executive pointed out, European import demand “may be up 2%, but that is nothing to be excited about.”