Global News Carriers expect no improvement in trans-Atlantic schedules

Shippers can expect the record-low schedule reliability recorded on the trans-Atlantic through April to continue for the rest of the year, carriers warn, as US imports from Europe show strong gains.

“We do not expect an improvement in schedule disruptions through the end of the year,” Matthew Hill, head of the North America import market for Maersk, told JOC.com. “The primary issue will be the continued erosion around schedule reliability and general operational limitations we see across the supply chain on both sides of the ocean.”

A Hapag-Lloyd spokesperson who did not want to be identified echoed the Maersk view.

“We do not expect any improvement in the operating business in the short term,” the source said. "We still see a strong market on the trans-Atlantic, especially in Northern Europe.”

Carriers have struggled to improve their schedule reliability with congestion on both sides of the Atlantic. On-time performance of 20 percent on the headhaul westbound trans-Atlantic in April was the highest so far this year, while schedule reliability on the trade averaged 17.4 percent over the first four months. That compares with 28.6 percent from January through April 2021 and 60 percent over the same period in early 2020, according to Sea-Intelligence Maritime Analysis.

To recover schedules destroyed by their heavily delayed vessels, carriers have been blanking sailings on North Europe-North America and Mediterranean-North America. By the end of July, they will have canceled 117 sailings on those trades, data from Drewry shows.

Hill said Maersk was expecting US demand out of Europe to remain stable in the coming months, but the ocean supply chain was so disrupted that the volume would continue to erode schedule reliability.

“This will be potentially exacerbated by terminal dwell in the US caused by the growing inventory problems, closures related to the Atlantic hurricane season, and the slower winter crossing associated with the colder months as we head towards the end of the year,” he said.

“We continue to make adjustments [to] services out of Europe to help mitigate the growing delays the industry is dealing with across the network,” Hill added.

US East Coast import volumes from Europe in May were up 42 percent year over year at 167,961 TEU, according to data from PIERS, a sister product of JOC.com within S&P Global.

Markus Panhauser, senior vice president for ocean freight in Europe at DHL Global Forwarding, said volume would be very strong on the trans-Atlantic until the end of the year, accompanied by elevated rate levels.

“Although freight rates are high, the trans-Atlantic volumes are very robust and continue to surge,” he told JOC.com. “There will be the traditional volume drop in August as some factories will close in the second half of July and the first half of August.”

Panhauser said European importers ordered early and warehouses are full, with some of DHL customers reporting inventory levels up 150 percent compared to last year. However, he is not expecting a strong peak season.

“Sales are a bit slow due to high inflation and people starting to travel,” he said. “Import volume in July and August is rather soft, but order volumes for Q4 are strong. We expect a further softening of short-term rates in July and August, but they will sharply increase in September. Ports will remain full in July and August as consignees cannot pick up their cargo in time and take it into their warehouses.” No room at European terminals With Europe’s terminal yards persistently full and shippers delaying the collection of their import containers because of the high levels of inventory they carry, there is little room for any increase in throughput numbers. Yet inbound volumes freed by the lifting of Shanghai lockdowns will land on top of the existing congestion. The delayed ships will start arriving in North Europe from the third week of June, right as the traditional Asia-Europe peak shipping season gets under way.

At the North American end of the trade, terminals on the US East Coast continue to battle waves of congestion, which has caused intermittent vessel backlogs outside the ports of Charleston, Savannah, New York and New Jersey, and Virginia. Robust US manufacturing and sustained consumer demand is keeping ships out of Europe full, while shippers continue to divert Asia-US cargo from choked US West Coast ports to the East Coast.

The disrupted ocean markets have pushed up spot rates on the trans-Atlantic since the beginning of January. Rates on the North Europe to North America trade have maintained an upward trajectory that began in April last year; the current rate of $7,866 per FEU is four times higher than April 2021 levels, according to rate benchmarking platform Xeneta.

Long-term contract rates of 90 days or more on the trans-Atlantic are up 360 percent year over year at $5,857/FEU, up an incredible $4,500 in the past year.

The recovering market was reflected in the US Manufacturing PMI survey for May that was released earlier this month. The US saw a solid expansion of manufacturing output in May, with production growth running well above the average seen over the past decade, Chris Williamson, chief business economist at S&P Global Market Intelligence, wrote in his analysis of the PMI.

However, Williamson said the survey revealed signs of slowing demand and a cooling of new manufacturing orders, with producers reporting ongoing issues with supply chain delays and labor shortages.

Signs of a slowdown in European manufacturing were more obvious in the S&P Global Eurozone Manufacturing PMI; Williamson issued a grim analysis of the survey results.

“The survey’s output gauge is indicative of official manufacturing production falling slightly so far in the second quarter, and forward-looking indicators such as the orders-to-inventory ratio suggest the rate of decline will accelerate in coming months, absent a sudden revival of demand for goods,” he noted.