As shipping market observers of a certain vintage will recall, 1980s Swedish rock band ‘Europe’ scored a huge hit with ‘The Final Countdown’. Following the global economic downturn, the European economy was facing up to a similarly fatalistic reckoning. Here we take a closer look at how things worked out in Europe, and the impact on seaborne trading patterns.
Not The Orient Express
When the economies of Asia even twitch, shipping market observers pay close attention and rightly so. China’s growth story has driven much of the expansion in seaborne trade in recent times, so when industrial production (IP) growth reportedly slowed to 6.9% in August, that made headline news. As has been well documented, industrial output growth in China and other Asian economies has driven rapid growth in imports of raw materials and also led to increased exports of manufactures to consumers in the West. Chinese and Indian IP combined is up by 99% on 2007 levels. Performance in Europe hasn’t got anywhere near those levels as its economies, particularly those in the Eurozone, have struggled badly since the crisis, but that doesn’t mean that it’s not worth taking a look at.
North And South
In fact, last year Europe was still close to China’s size as a seaborne importer, with volumes estimated at around 2 billion tonnes. But of course in terms of today’s economic performance, Europe is way behind. Industrial production in Europe, as the graph shows, is still below pre-recession levels and this has impacted strongly on bulk imports to Europe. In Northern Europe, IP in Germany, France and the UK combined is around 7% down on 2007 levels, and in Southern Europe things have been even worse, with IP in Italy and Spain combined down a whopping 27% on 2007. As a result, Europe’s coal imports in 2014 are projected to remain below 2007 levels at just under 200mt and iron ore imports are set to be well below 2007 levels at less than 130mt. Crude oil imports are projected to hit 8.4m bpd in 2014, 16% down on 2007.
Count The Boxes
But intriguingly, not all aspects of recent European economic activity are such bad news for shipping. Europe is a major importer of finished goods too, and in 2013 volumes on the Far East-Europe container trade started to expand again. In the first eight months of this year, European box imports from Asia were up by 8% year-on-year. Growing demand for manufactures, production of which has been outsourced far away, backed by inventory rebuilding, has left monthly box imports from Asia this year so far up 11% on 2007 levels, even if forecasters are suggesting that darker economic clouds are gathering once again over Europe.
Old Habits Die Hard
So, the economic crisis in Europe hit shipping hard, and the key drivers of trade are today elsewhere. But European consumers can’t kick old habits and they love a shopping trip. Industrial activity in Europe may well be weak, but in one arena at least, European activity has supported seaborne volumes. The ‘final’ outcome awaits but so far this year there’s been some counting up as well as down.