Difficult European economy makes for continued rough sailing, says Global Port Tracker report

The economic environment in Europe faces the same mounting challenges as it has in recent months, with no clear remedy in sight. That was a major theme of the most recent edition of the Global Port Tracker report from Hackett Associates and the Bremen Institute of Shipping Economics and Logistics.

Ports surveyed in this report include the six major container reports in North Europe: le Havre, Antwerp, Zeebrugge, Rotterdam, Bremen/Bremerhaven, and Hamburg.

“The latest two months of container flows have impacted our trade model and shifted the European imports from 1.5 per cent growth to a 2.1 per cent drop in North Europe and a 1.2 per cent decrease in the Mediterranean and Black Sea region,” said Ben Hackett, president of Hackett Associates, in a statement. The lack of confidence in the handling of the Euro and sovereign debt crisis has caused the consumer to hunker down.”

According to the report, European exports are forecasted to increase by 2.4 percent in 2012, with anticipated gains of 2.5 percent in North Europe and 2.5 percent in the Mediterranean and Black Sea region. And it also expects a 2 percent gain in total imports over the next six months, which is up compared to a 0.3 decrease for the same timeframe a year ago, while exports are projected to see a 0.1 percent gain compared to a 7.9 percent jump during the same period in 2011.

Looking at cumulative export volumes for the surveyed ports on a quarterly basis, the report explained that export volumes were up 0.4 percent compared to the first quarter, which translates into a 3.6 percent annual decline. What’s more, the report noted that only two of the next four quarters are expected to show growth from quarter to quarter or annually, with all changes expected to be in the single digit range.

In his analysis of the report, Hackett wrote that European economic data “makes for depressing reading,” pointing out that most of its main economic data indicates a recession is likely. These figures include consumer and production manager’s confidence, trade volumes, and production indices, among others. He added that import volumes are in a state of disarray, with some Peak Season and annual flows that will show negative growth.

“On the European side, things have slowed down dramatically,” Hackett told LM. “There is a lack of confidence [as noted in economic metrics] and GDP is down and sales are weak. It is clear that there is a slowdown. And nothing has really been done to solve the key issues like the Euro crisis and sovereign debt crisis, so the next 12 months are going to be critical.”

While Europe is still dealing with myriad issues, Hackett said that conditions in the U.S. are more positive.

The reason for this is that there is still growth on the import side at nearly 5 percent even with volumes down from previous levels, which he said was expected. On the export side, Midwest droughts have affected freight flows, too.

And with depressed volumes and faltering economic conditions, Hackett observed that there is still too much ocean capacity at the moment, with carriers electing to remain vessels in rotation even though demand is down.

“Carriers are dropping some voyages for a week and taking out capacity that way, but to address it more seriously they really need to lay up ships or scrapping some,” he said. “As long as they don’t do that at some point, the pressure gets to be too much…and they will get back into the price wars.”

But that is already proving to be problematic for ocean carriers as rates are consistently declining, with Europe-based rates having dropped the last three weeks, coupled with weakness on the Trans-Pacific lanes, too.

Should the situation in Europe continue to worsen, it could have a trickle down effect on the United States economy, too, in the form of lower consumer confidence, Hackett explained. This would likely lead to a higher personal savings rate in the U.S. with the after effect being lower trade levels, with the warning signs on the economy.