Trans-Atlantic Westbound Demand Fell Sharply In March Amid Rate Decline

Container volume on the westbound trans-Atlantic fell sharply in March, with forwarders and analysts expecting the steadily weakening demand to undermine the trade lane’s historically strong second quarter.

An abundance of capacity and improving schedule reliability through the first quarter accompanied the slowing volume, dragging rate levels down from last year’s record highs.

US imports from North Europe fell 16.3 percent in March year over year to 172,658 TEU, following a 5.7 percent drop in demand in February, according to PIERS, a sister product of the Journal of Commerce within S&P Global. The 516,531 TEU handled in the first quarter was 5.2 percent lower than Q1 2022, despite the year getting off to a positive start with a 9 percent year-on-year increase in January volume.

Data from Platts, a sister company of the Journal of Commerce, shows rates in the Atlantic Basin continuing their descent as soft cargo demand and excess vessel capacity take hold of the market. This week’s rate of $3,500/FEU was the lowest since April 2021, Platts wrote in an update this week.

Meanwhile, rate benchmarking platform Xeneta shows spot rates on the westbound trans-Atlantic are down 69 percent year over year, although most of that decline has occurred since the beginning of January. Current spot rates of $2,373 per FEU are down 62 percent since Dec. 31.

Contract rates have fallen 33 percent since Dec. 31 and are at $3,111/FEU this week, down 38 percent year over year.

Service levels improving 

Forwarders and analysts say the supply-demand dynamics of the trans-Atlantic are being affected by declining US import volumes, with improving on-time port performance adding to the oversupply of capacity from carriers repositioning vessels from the weak Asian trades.

“Demand keeps softening, space is available on all services, (and) schedule integrity has improved,” DHL Global Forwarding noted in its April market outlook released this week.

Schedule reliability on the trans-Atlantic westbound routes in February, the latest data available, stood at 44.3 percent, according to Sea-Intelligence Maritime Analysis. While still far below acceptable service levels, the performance metric is improving steadily and is significantly higher than the dismal 14.3 percent on-time performance recorded in February 2022.

However, as reliability slowly improves, DHL warned that transit times needed to be watched as vessels were starting to slow steam to comply with IMO 2023 regulations on reducing fuel consumption and CO₂ emissions.

“In order to compensate for the increased transit times, carriers are adding additional vessels to selected services,” DHL noted.

Carriers are also blanking sailings on the trans-Atlantic, although not at the same levels seen on the trans-Pacific and Asia-Europe trades. An average of 10 percent of capacity was blanked during the first quarter, but in April just 3.1 percent of capacity was scheduled to be withdrawn, with 2 percent in May, according to Sea-Intelligence.

By: Greg Knowler / JOC