The export focused automotive sector in Europe is facing a long and painful recovery, impacting volume on the North Atlantic. Photo credit: Shutterstock
US imports of vehicles and auto parts from Europe drove off a cliff in the first half of 2020, plunging 45 percent year over year as the coronavirus disease 2019 (COVID-19) crushed demand and is expected to suppress volumes through the rest of the year.
With the US struggling to contain the pandemic, and new outbreaks being reported across Europe, there is little optimism of a recovery of the auto sector that is so important for the trans-Atlantic trade.
“Automotive is the really weak sector and that is going to continue,” Markus Panhauser, head of ocean freight Europe at DHL Global Forwarding, said in the latest weekly episode of JOC Uncharted. “Production will remain slow and the sector will not recover quickly.”
The vast majority of US vehicle and spare parts imports are from Germany, which recorded a 39 percent year over year decline in export volume in the first half, to 24,248 TEU, according to data from PIERS, a sister company of JOC.com within IHS Markit. The Netherlands, the second-largest automotive exporter to the US, saw volumes plummet 61 percent.
Interestingly, the IHS Markit Europe Sector PMI in July saw the automobiles and auto parts sector recording its strongest rate of expansion since the PMI survey began in January 1998. Whether that translates into rising auto exports to the US is not yet clear.
Total US imports from Europe fell 8.2 percent in the first half to 1.09 million TEU. The biggest declines were recorded in May when volume from Europe to North America fell by more than 20 percent year over year, and in June when the volume decline was 17 percent.
Carriers have tried to match the falling demand by making significant capacity cuts through the third quarter. A total of 72 blanked sailings have been announced by carriers on the trans-Atlantic that will run through September, according to Sea-Intelligence Maritime Analysis.
Alphaliner reported in its latest newsletter that the average weekly vessel capacity on the Europe-North America trade in July was almost 5 percent down compared to the same month last year at 136,500 TEU. The 2M Alliance of Maersk and Mediterranean Shipping Co. (MSC) have led the capacity cutting efforts, suspending one of their four joint 2M loops (TA4) between North Europe and the US East Coast until at least the end of August. THE Alliance has blanked its North Europe-US East Coast services, AL1 and AL4.
MSC remains the largest carrier in the Europe-North America trade with a market
share of 29.1 percent despite a 12.4 percent capacity reduction since July last year, Alphaliner reported. Hapag-Lloyd is second with a 22.8 percent market share, and Maersk is third with 12.5 percent.
US alcohol imports pour in
While weak demand applies the brakes to US automotive imports, it is the opposite for the alcohol sector that has reported surging demand ahead of a possible increase in tariffs from September. The US wants to impose new tariffs on $3.1 billion in goods from France, Germany, Spain, and the UK that will cover beer and spirits, among other products.
Alison Leavitt, managing director of the Wine and Spirits Shippers Association (WSSA), said US importers were front-loading to get ahead of any tariffs to be levied on European alcohol.
“There is a massive surge currently, especially of blended Scotch whisky, and other products that are potentially going to be at a higher duty come September, so we’re booking 100 to 200 containers a week to try to push them out to get them out in time,” Leavitt told JOC Uncharted. “We don’t expect any volume drop off in the upcoming months,” she added.
However, the canceled sailings on the trans-Atlantic were creating problems for shippers. Leavitt said the WSSA was seeing backlogs and overbooking issues at some European ports since the suspension of 2M’s TA4 service.
“We might have 200 containers sitting on the pier in Liverpool,” she said. “So we’re really going to be running up against some very unhappy US importers if they cannot get their product into the US in time to beat the potential tariffs. If those tariffs do go into effect in September and we’ve got cargo stuck in Liverpool or Southampton or Rotterdam, it’s going to be a big issue.”
Panhauser noted the trans-Atlantic was a sensitive trade and as soon as one or two services were removed, the others quickly filled up.
Contact Greg Knowler at [email protected] and follow him on Twitter: @greg_knowler.
