Turnabout on the Atlantic: As Volumes Soar, Exporters Pay More

(Shipping Digest – Peter T. Leach)

Freight rates on imports fall as volumes drop

The dramatic decline of the U.S. dollar against the currencies of its major trading partners in Europe over the last year continues to drive the reversal of fortune on the trans-Atlantic trade lanes, as U.S. products become more competitive in Europe, while European products grow more expensive in the U.S.

Eastbound ships are stacked to capacity with containers filled with U.S. goods bound for Europe, while westbound ships are only running a little more than 80% full. But the dollar’s decline appears to be leveling off, as major European economies stutter and the euro and the pound begin to lose steam. That could stem the decline in U.S. imports in the next year and slow U.S. export growth, but forecasters’ crystal balls are still a bit murky on this point.

The space shortage has eased a bit this month because much of Europe is on vacation. “So there’s not a lot of cargo moving in mid-August,” said Ron Bailey, manger of Brewster Lines, a St. Louis-based non-vessel-operating common carrier. In addition, the dollar has been getting stronger – on August 13, the exchange rate was $1.49 to the euro, compared to $1.59 at its weakest point.

“That’s starting to take a hit. So as a result, there’s more space available, more equipment, less demand,” Bailey said. That translates into shorter waiting times, but shippers may have to wait several weeks for a booking, depending on the origin and destination ports.

Beset by declining volumes and freight rates on the westbound leg of the trade in the first few months of the year, carriers have largely completed the reductions in vessel capacity they thought necessary to stabilize rates. They expect no further cuts. But even in the face of tight capacity on the eastbound, or backhaul leg, and expectations of some improvement in westbound volumes by the fourth quarter, carriers don’t plan to add capacity. Carriers plan further rate increases in the eastbound trade where demand is strong and supply is limited. Read the complete article.