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Thai National Shippers’ Council
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Hellenic Shpg 23/2/14 - N/S Supply/demand: Europe-Mid East-Indian Subcont

India’s imports from Europe remained disappointing in 4Q13, leaving ocean carriers with exacerbated empty container equipment repositioning costs from the Middle East.

 

Eastbound

 

Cargo shipped from Europe to the Middle East and Indian Subcontinent (MEISC) continued falling in 4Q13, reaching a monthly average of just 245,000 teu, 3% below the previous quarter. The Middle East’s traffic fell by 2%, to 161,000 teu, whilst the Indian Subcontinent’s (ISC) fell by a more alarming 5.8%, down to 84,000 teu (see Figure 1).

 

It is the low season due in part to the Indian festive season coming to an end in November, so the result is not surprising, and it is in line with the tradelane’s overall cargo decline of 3% for the whole year, with cargo to the ME falling by 1.2% compared to 2012, and that to the ISC declining by 6.8%. It is usual to attribute the decline to Asian manufacturers gaining yet more market share from European suppliers but Europe’s industrial cargo base remains very different, and more consumer orientated trade from Asia to MEISC fell by an even higher 13% last year.

 

The reality is that economic conditions in the MEISC region have yet to get back to where they were before the global financial crisis of 2008, when India was a vibrant part of the BRIC region’s impressive expansion, and Middle East investors were more adventurous with their petrodollars. India, in particular, is now weighed down by a variety of adverse factors, such as high inflation, a weak currency and lower foreign investment.  Over the past year the rupee has lost 15% of its value against the US dollar, making imports that much more expensive, for example, particularly during the last quarter.

 

Figure 1

Eastbound Europe to MidEISC Container Traffic (’000 teu)

 

                                                                              

                                                                              

                               Source: Drewry Maritime Research, derived from CTS (www.containerstatistics.com)

 

Ocean carriers’ response to the downturn was to make only a few minor adjustments to their schedules, many of which involved cancelled sailings from Asia to Europe, leading to fewer sailings on the way back to Asia. Direct services were largely unchanged which is surprising, given that few can be making any money.

 

The tradelane is difficult to monitor, being served by a wide range of dedicated schedules from both Northern Europe and the Mediterranean, as well as Asia/Europe ULCVs over 10,000 teu that stop off at Middle East ports on the empty return leg back to Asia, such as Jeddah and Dubai, or prefer to double-dip instead via other transhipment hubs such as Salalah, Khor Fakkan and Colombo.

India’s ports still cannot handle these ULCVs yet due to draught and turning circle restrictions, or unreasonable deviation costs. Moreover, good berthing windows are hard to get.

 

It means that eastbound shippers remain spoilt for choice, with carriers being compelled to offer a wide range of value-added services to compete successfully, the latest of which includes direct calls in Mid-East Gulf ports such as Jubail and Abu Dhabi.

 

The consequence of the many different ways in which the tradelane can be served is that it is extremely difficult to measure changes made to vessel space offered by all carriers with any accuracy. As reported in ‘Year ends badly for carriers’ (E/W Supply/demand: Asia-North Europe), ULCVs sailing back to Asia from Northern Europe were only just over 60% full in 4Q13, so had plenty of space for MEISC cargo.

 

Figures 2 and 3, measuring eastbound vessel capacity and average vessel utilisation respectively, need to be treated carefully, therefore, and are given for guidance purposes only.

 

Figure 2

Eastbound Europe to MEISC Capacity (’000 teu)

 

                                                                              

                                                                              

                                 Source: Drewry Maritime Research

 

Figure 3

Eastbound Europe to MidEISC Utilisation v Rates

 

                                                                              

                                                                              

                                    Sources: Drewry Maritime Research; Drewry Container Freight Rate Insight (www.drewry.co.uk/cfri)

 

Westbound

 

Exports from MEISC to Europe also continued falling in 4Q13 due to seasonal factors, reaching an average of 177,000 teu/month, 5% below the previous quarter’s average (see Figure 4). Due to India’s infamously slow supply chains, European importers start stocking up on festive season goods from the region early, making the fourth quarter a quiet period.

 

The westbound tradelane remains opposite to the eastbound route, with exports from ISC exceeding imports, and vice-versa for the Middle East. The ISC’s traffic, consisting largely of retail and semi-manufactured goods, also differs widely to the Middle-East’s petrochemical exports, so summarising regional trends remains difficult.

 

Looking at the big picture only, exports from ISC fell 4% between 3Q13 and 4Q13, down to a monthly average of 122,000 teu (compared to 84,000 teu eastbound), whilst exports from the Middle East fell by 8%, down to only 55,000 teu (compared to 161,000 teu eastbound), giving ocean carriers an even bigger empty equipment imbalance headache to resolve than usual.

 

Figure 4

Westbound Europe to MidEISC Container Traffic (’000 teu)

 

                                                                               

                                                                              

                                Source: Drewry Maritime Research, derived from CTS (www.containerstatistics.com)

 

The totals for the year still ended higher than in 2012, however, with MEISC’s overall exports to Europe growing by 6% , to 2.2 million teu, due to 6% growth from both ISC and the Middle East. Petrochemical exports from the Middle East have yet to take off, however, as indicated in Figure 4a.

 

Figure 4a

Synthetic Resin (Customs Code 39) Exports from Middle East to EU27

 

                                                                              

                                                                               

                                     Source: Global Trade Information Services

 

The same complications measuring the way ocean carriers’ vessel capacity changed in 4Q13 that was described in the eastbound section apply to the westbound route, so Figures 5 and 6 are, similarly, given for guidance purposes only. The big difference between the two routes is that westbound ULCVs departing from Asia to Europe generally have far less space available for wayport cargo from the MEISC region, so interfere less in the tradelane’s supply-demand fundamentals.

 

This was particularly so in December, when China’s early New Year holiday led to a surge in cargo that filled many departing vessels to the brim.

 

Figure 5

Westbound Europe to MidEISC Capacity (’000 teu)

 

                                                                               

                                                                              

                                    Source: Drewry Maritime Research

 

Figure 6

Westbound Europe to MidEISC Utilisation v Rates

 

                                                                               

                                                                              

                                     Sources: Drewry Maritime Research; Drewry Container Freight Rate Insight (www.drewry.co.uk/cfri)

 

Table 1

Europe to MidEISC – Estimated Monthly Supply/Demand Position

 

                                                                              

                                                                               

                                        Notes: *Based on effective capacity after deductions are made for deadweight and high-cube limitations and then again for out-of-scope cargoes, ie. those relayed to areas outside the range.

Where relevant,operational capacities have also been adjusted for slots allocated to wayport cargoes.

Source: Drewry Maritime Research

 

Our View

Both eastbound and westbound cargo growth will return in 1Q14, added to which vessel space will also become better utilised due to increased sailing cancellations from Asia during the aftermath of China’s New Year celebrations.