Taking The Rollercoaster Ride On The Asia-Europe Trade


The dramatic contraction of container volumes on the peak leg Asia-Europe route in 2015 represented a major component of the overall weak rate of global container trade growth last year. However, there are signs that trade growth on this key route has re-entered positive territory in 2016 so far and there are a number of factors that may support further trade expansion on the route in the remainder of the year.

Sudden Change In Direction

Having attained a rate of 7.4% in 2014, growth on the peak leg Asia-Europe container trade exhibited a dramatic turnabout in 2015: box volumes contracted 3.2% to total 14.9m TEU in the full year, dragging down global trade growth to an estimated rate of just 2.3% last year. Russian container imports from Asia fell 21% in 2015, to 0.5m TEU, accounting for 25% of the total fall in European box imports from Asia last year. But Asian container exports to other areas of Europe fell too, with the indicator for imports to North Europe contracting 2%, and the indicator for imports to the Mediterranean falling 1% (see the Graph of the Month).

What Caused The Dip?

The collapse in Russia’s box imports from Asia last year was clearly significant, driven by a sharp fall in Russian oil and gas revenues, which contributed to a 3.8% contraction in Russia’s GDP. But even excluding the decline in Russian imports, trade on the peak leg Asia-Europe route fell last year. A weak Euro increased import costs for the Eurozone, where there were clear economic difficulties in a number of countries. Additionally, European import levels in 2015 also appear to have been impacted by inventory level readjustments: it is quite likely that European retailers stocked relatively heavily in 2014, when box import growth surged, and drew down on their inventories in 2015, when import volumes fell. This could explain why Asian box exports to Germany and the UK, economies which grew at estimated rates of 1.5% and 2.2% in 2015 respectively, contracted by 5% and 1% respectively last year.

A Gradual Recovery?

Having fallen 5.8% y-o-y in Q3 2015, and 0.1% y-o-y in Q4 2015, box trade on the peak leg Asia-Europe route increased 1.2% y-o-y in Q1 2016, suggesting that the worst may now be over. UK container imports from Asia grew 5.4% y-o-y in the first four months of 2016, although this may partly reflect a temporary boost with retailers stocking ahead of Britain’s recent ‘Brexit’ vote on EU membership. Container imports into Russia grew 2.3% y-o-y during January-April, and with oil prices having fallen so sharply in 2015, the severity of this impact is unlikely to be matched in 2016.

What Lies Ahead?

With container trade growth finally gaining traction on the Asia-Europe peak leg route, boxship utilisation levels and freight rates on the trade have both reportedly improved in recent months. Clear risks remain, including the implications of the ‘Brexit’ result and a worsening of difficulties in the Eurozone. However, in full year 2016 Asian container exports to Europe are projected to grow at a rate of 3.9%, to total 15.5m TEU, with signs, including the regional analysis of this trade lane, now indicating that the worst could be over and that prospects for further trade growth appear positive.


Source: Clarkson Research Services



Comments are closed.