News / Green shoots of recovery on Asia-N Europe 'will need to be nurtured'

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While there appears to be little short-term hope of a rebound in freight rates on the Asia-North Europe trade, there are emerging signs that a demand recovery over the medium term could be under way.

According to the latest analysis from consultant Maritime Strategies International (MSI), there is mounting evidence that demand for some key products imported into Europe may be about to return.

MSI said demand for furniture and home buildings materials, which normally accounts for more than 20% of the total containerised trade between Asia and North Europe, could be set to rebound after a couple of years of high interest rates and the cost of living crisis had depressed demand.

“Soaring money market rates – and subsequently mortgage rates – resulted in a steep decline in permits for new buildings, both residential and office. Accordingly, we have identified this plunge in the property market as a primary driver for the declines in cargo volumes on the Asia-Europe westbound trade inQ3 22-Q1 23,” it says in its monthly Horizons report.

It explains that recent European data indicates imports of furniture and other critical building materials were showing signs of a rebound “following the nosedives in H2 22″.

“But the latest Eurostat data suggest the EU’s property market has found a floor. Inflation rates in both the EU and the euro area are also coming down and stood materially lower as of August, relative to their peak last October.

“This is indeed good news for container shipping,” it added.

The chart below shows that imports of furniture, ceramics, metals and metallic materials and wood and associated materials had returned to slightly below pre-pandemic levels.

Source: Maritime Strategies International

The latest volume data from Container Trade Statistics appeared to corroborate this trend – CTS recorded a total of just under 1.5m teu shipped from Asia to Europe in July, compared with the 1.4m teu shipped in July last year.

And MSI predicted that the final quarter would continue to see year-on-year demand growth on the trade, and forecasts a 12.1% year-on-year increase in volumes, which also reflects just how weak the fourth quarter of last year was.

But it added these green shoots would need to be nurtured.

“We remain cautious with respect to the property market outlook, as it is too early to say if the ECB is done with the rate hikes, and this provides a clear downside risk to a potential rebound,” it warned.