The shipping lanes of the Pacific and Indian Oceans show the diverging fortunes of U.S. and European consumers ahead of the busiest shopping season of the year.
A.P. Moeller-Maersk A/S (MAERSKB), the world’s biggest container line, is among carriers raising rates on Asia-U.S. routes as three-month-high consumer confidence and job growth at the quickest pace in five months tempt retailers to stock up ahead of the holiday-shopping rush. By contrast, shipping lines are cutting capacity to Europe.
“Christmas will come to America, but probably not to Europe,” Soeren Skou, chief executive officer of A.P. Moeller- Maersk’s container-shipping arm, said in an interview.
On Asia-Europe routes, Copenhagen-based Maersk and other lines are paring services as economic confidence at a three-year low and record euro-area unemployment damp demand. The slowdown has hit European retailers including Marks & Spencer Group Plc (MKS) and Carrefour SA (CA), while U.S. chains including Macy’s Inc. (M), Target Corp. (TGT) and Victoria’s Secrets’ parent Limited Brands Inc. (LTD) are predicting higher sales.
“Europe is still on a downward trend,” said Wan Min, executive vice president at China Cosco Holdings Co. (1919), parent of the nation’s biggest container line. “The U.S. will see a mild growth in shipping demand in the third quarter.”
Maersk expects full-year Asia-North America volumes to increase as much as 3 percent, compared with a 3 percent decline on Europe routes, Skou said. The company has pared capacity on Asia-Europe routes by about 10 percent and it will make cuts in the fourth quarter, he said.
“We are seeing some of the peak from Asia to U.S., but basically no peak for Asia to Europe,” he said.
U.S. retailers may boost container imports 7.3 percent this month from a year earlier and by 13 percent in October as they stock up for the holidays, according to the Washington-based National Retail Federation. The holiday-shopping season, which begins in November around Thanksgiving, makes up between 25 and 40 percent of U.S. retailers’ annual sales, the trade group said.
Maersk plans to raise spot trans-Pacific rates by $500 per forty-foot container starting Sept. 10. China Cosco is planning an $800 per twenty-foot container levy starting October 1 because of port congestion. China Shipping Container Lines Co. (2866) intends to increase rates every month until November, said Managing Director Zhao Hongzhou, without elaboration.
Trans-Pacific container rates have already risen 4.9 percent since the end of July, as shippers retain some gains from an industry-wide increase at the start of August, based on a Clarkson Plc index. Asia-Europe rates have fallen 23 percent in the same period, according to the shipbroker.
The decline has prompted the G6 Alliance, whose members include Neptune Orient Lines Ltd. (NOL)’s APL Ltd. and Orient Overseas International Ltd. (316), to halt one of six weekly Asia-Europe services next month. The CKYH alliance will also cut of one of its five Asia-Europe services starting mid-October. Its members include China Cosco and Hanjin Shipping Co.
Shipping lines had idled 216 ships, with a capacity of 467,000 containers, by the end of July, four times more than a year earlier as demand on Asia-Europe routes wanes, according to Alphaliner, a shipping-industry data provider.
“Europe is still very uncertain,” said Stanley Shen, a spokesman at Hong Kong-based Orient Overseas. “People are not spending money.”
Orient Overseas has dropped 11 percent this year in Hong Kong trading, while China Cosco has tumbled 28 percent. Maersk is little changed in Copenhagen.
European economic confidence fell to the lowest since 2009 last month and unemployment in the euro area has surpassed 11 percent as governments struggle to contain a sovereign debt crisis. Countries including the U.K., Spain and Italy are all in recessions.
“In the coming period, everybody will be under pressure,” Georges Plassat, chairman and chief executive officer at Carrefour, Europe’s largest retailer, said on an Aug. 30 conference call. “Retailers are going to have to face up to drop in consumption.”
Shipping lines are also contending with fuel prices that have surged 55 percent in the past two years. Operators have slowed vessels to an average speed of 10.44 knots, about 10 percent slower than a year earlier to pare fuel usage and cut overcapacity, according to data compiled by Bloomberg.
On U.S. routes a possible East- and Gulf-coast dock strike could disrupt shipments ahead of the holiday season, Shen said. A one-week stoppage would cause a month-long disruption to lines’ operations, while a two-week shutdown would take three months to recover from, he said.
The dispute, which centers on a new labor contract, could affect ports including New York, Boston and Houston. The International Longshoremen’s Association has said it could vote on a strike from Oct. 1 if negotiations fail to produce a deal.
Still, shipping lines remain more confident about U.S. demand than European as they head into the holiday-shipping season, said Zhao of China Shipping Container, the nation’s second-biggest box carrier.
“The U.S. market is turning gradually better,” he said. “On Asia-Europe trades, there is much less certainty about rates.”
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