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Brexit and US-China trade war dampens Euro freight market

THE US-China trade war and Brexit are casting dark clouds over the European economy and freight outlook, say analysts and executives, reports New York's FreightWaves

Brexit and US-China trade war dampens Euro freight market

THE US-China trade war and Brexit are casting dark clouds over the European economy and freight outlook, say analysts and executives, reports New York's FreightWaves

06 September 2019 - 19:00

THE US-China trade war and Brexit are casting dark clouds over the European economy and freight outlook, say analysts and executives, reports New York's FreightWaves.

'I think the biggest problem right now is the uncertainty that is causing people to hold off on investments and making decisions,' said Jan de Rijk Logistics CEO Sebastian Scholte, and past chairman of The International Air Cargo Association (TIACA).



'Most of that uncertainty comes from the US-China trade dispute. The Brexit effect is a lot smaller in terms of its impact on the global economy, but it adds to uncertainty,' said Mr Scholte.



A global slowdown has affected growth across western Europe in 2019. Germany's traditional reliance on exports has proven particularly vulnerable. Leading European economies reported negative gross domestic product growth in the second quarter, raising fears of a recession.



Europe's economy could slow further in the months ahead. Last week Japanese financial investment firm Nomura downgraded the continent's growth prospects, noting that 'additional uncertainty around US trade policy and a further weakening of external demand' are likely to negatively affect the euro area outlook via three main channels - lower investment, private consumption and exports.



'As a consequence, we have decided to lower our euro area gross domestic product growth forecasts for 2019 and 2020 by 0.1 percentage point to 1.0 percent and 1.1 per cent year-on-year, respectively,' said Nomura.



Air freight analyst WorldACD reported that Asia Pacific and Europe had been the biggest 'losers' of the US-China trade war, suffering negative growth measured in dollars over the first seven months of 2019 of 10.9 per cent and 14.8 per cent, respectively, for outgoing cargo and 11.4 per cent and 10.8 per cent, respectively, for incoming air cargo.



This has translated into substantial price declines on key air freight lanes into Europe. For example, the average air freight rate from Shanghai Pudong International Airport to Europe on September 2 was US$2.20 per kilogramme (kg), according to TAC Index - Contracting Agent. This compared to $2.83 per kg on September 3, 2018.



'Upheaval in international relations has been the order of the day this year,' noted WorldACD. 'Now that consumer goods have also been targeted for tariff increases, air cargo figures as from August may well take an even deeper dive than shown so far.'



London's Drewry Maritime Research remains upbeat on Europe's box trade prospects this year despite the gathering clouds. Its latest market forecast, published in July, predicts Asia-North Europe westbound volumes will grow 4.3 per cent this year, compared to just 1.2 per cent over 2018, while European container port throughput is expected to increase 2.6 per cent year on year.


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