Lower Capacity and Rising Demand Drive Higher Rates on the Atlantic

Uncertainty is affecting the Atlantic trade lane as election debates heat up and we approach a deadline for US East Coast port workers and operators to reach a contract agreement.

Atlantic rates have been volatile this year as shippers seek to avoid the worst impacts of the Red Sea diversion, which has shifted capacity from the Atlantic to both the Pacific and Asia/Europe.

The impact of the Red Sea diversion on the Atlantic shipping lane was immediately evident, with rates from the Mediterranean rising from under $1,500 per FEU to nearly $2,250 per FEU in February this year. And a similar impact was seen in rates from North Europe, which jumped from $1,875 per FEU to $2,250 per FEU in the same month, according to Xeneta data.

Currently, rates for North European exports to the United States are $2,750 per FEU and from the Mediterranean are $2,250 per FEU, up 64.68% and 43.73% year-on-year, Xeneta said.

However, Atlantic volumes have had little impact on freight rates, according to Container Trade Statistics (CTS) managing director Nigel Pusey: “US, Canada and European volumes on the Atlantic remain constant and largely unaffected by the Red Sea conflict - volumes and freight rates have seen little knock on from general box shortages in other geographies.”

However, the increase in cargo volumes cannot account for all of these price increases, with North American export volumes, including the US and Canada, up 12.39%, or 113,180 TEU, in the seven months to July 2024, to 1.026 million TEU, compared to 912,894 TEU in the same period last year, according to CTS data.

Meanwhile, North American imports rose 5% from 2.079 million TEUs to 2.183 million TEUs, up 103,786 TEUs over the same period, CTS said.

The rate changes are partly due to the early arrival of the peak season, but there has also been an increase in the introduction of more vessels, led by Ocean Alliance.

French carrier CMA CGM has five Atlantic services by mid-2023, three in the alliance, all to the US, with 15 vessels totaling 83,000 TEUs. By mid-2024, that number has dropped to four services, three in the alliance to the US, with eight vessels totaling 55,000 TEUs.

The carrier’s alliance partner Evergreen has not operated a vessel in the Atlantic since July, when the Ever Living was withdrawn and joined services in Asia, and is not expected to return to the Atlantic until November 1.

MDS Transmodal data shows that Evergreen currently has no vessels in the trade lane, but does provide US East Coast services through its Ocean Alliance partners. Evergreen and CMA CGM are not alone in shifting capacity away from the Atlantic trade lanes, with MDS Transmodal statistics showing total capacity down 18.6% year-on-year to 872,630 TEUs, from 1,071,537 TEUs.

Interestingly, CMA CGM’s redeployments have been largely to the Pacific, where the carrier’s deployed capacity has increased by 5%, compared to just 0.7% on the Asia/Europe trade.

Concerns now turn to October 1, when East Coast dockworkers are expected to strike if negotiations with employers break down.

Dynamar analyst Darron Wadey said the National Retail Federation/Hackett Associates Global Port Tracker forecasts imports into the United States will rise 14% year-over-year in September to 2.3 million TEUs, Wadey reported, as shippers bring in cargo early.

He said this is largely due to imports from Asia, although transatlantic shipments, dominated by European exports, will play a supporting role.

“There’s no doubt that carriers will have contingency plans [to maintain service] — a plan in place if you will,” he added.

Meanwhile, Xeneta chief analyst Peter Sand warned that “Everybody doing business with the US should feel concerned,” following Tuesday’s election debate between Donald Trump and Kamala Harris.

Tariffs would increase by 20% across the board if Trump wins, and by 60% to 100% on exports from China.

However, Sand also pointed to a Biden/Harris administration that has maintained tariffs imposed by Trump during his first term, and there is no expectation that those trade barriers will be lifted, or that a Harris presidency would not increase the protectionism implied by these import duties.

It is this kind of uncertainty that is killing trade, according to Xeneta who claim that tariff levels under Harris would be “different”, “The fact that we don’t know what tariffs to expect causes uncertainty,” said Sand, and means “Everybody doing business with the US should feel concerned.”

Source: Phaata.com (via Container-News)

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