European ports are optimistic but fear trade war could disrupt shipping and cargo traffic

Despite the optimism generally prevalent among most European ports, which have benefited in the past from the tailwinds accompanying world trade, representatives of these ports express concern over the possible impact of the U.S. steel and aluminum tariffs on Trans-Atlantic trade and shipping. They fear that a trade war, escalated by tit-for-tat retaliatory tariffs, could easily disrupt the shipping and cargo movement on both sides of the Atlantic.

These fears were heightened by the just-concluded G-7 summit meeting in Quebec which did not go according to script for the Europeans who fear that this summit, the worst in the history of the G-7 nations, could hit shipping and cargo traffic.

The image of U.S. President Donald Trump, sitting with his hands crossed, and German Chancellor Angela Merkel standing with both her hands on the table and staring at him in a confrontational pose watched by Japanese Prime Minister Shinzo Abe, pretty much sums up the summit result. This picture of disunity went viral on social media. The image dramatically depicts the German leader in an assertive pose, planting both hands firmly on a crisp tablecloth as she addresses President Donald Trump, who is seated before her with his arms crossed wearing a dispassionate expression.

Beside Trump is his national security adviser, John Bolton, apparently speaking above the locked eyes of the U.S. and German leaders. A seemingly unimpressed Japanese Prime Minister Shinzō Abe gazes at the group.

Trans-Atlantic Cooperation?

Officials and businesspeople in Germany, in private conversations with this correspondent, emphasized that Europeans are not interested in starting a trade war with the U.S; however, they felt the Trump’s administration’s plan to impose tariffs on European products, starting with steel and aluminum, violated the “letter and spirit” of trans-Atlantic cooperation, and could cause trade and shipping disruption.

The Europeans want the tariff exemption to continue, failing which they have threatened with retaliatory tariffs against U.S. products such as whiskey, motor-bikes, jeans, etc.

European ports see these as ominous signs of an imminent trade war that would severely cripple shipping and cargo traffic. Indeed, Germany based economists, including Dennis Snower, the President of the Kiel Institute for World Economy, warn against escalation of the trade conflict, and urge the EU to use the opportunity to present itself in these difficult times as the “voice of reason” and refrain from hitting back with tariffs. These experts believe that competitive companies and industries would not suffer and, in fact, benefit in the medium and long term because trade with the EU would continue to grow.

Port of Hamburg

Hamburg port sees the tariffs as “yet another setback” because these will, invariably, affect its trans-Atlantic cargo traffic. For the port, a trade war with the U.S. will be the second major setback after its shipping was already hit by EU sanctions imposed in 2014 against Russia over the Ukraine crisis. Another uncertainty looming for it is the possible impact of Brexit on its cargo traffic.

Hamburg’s economics senator Frank Horch, who criticized U.S. tariffs as a “violation of the prevalent regulations of the World Trade Organization (WTO)”, reminded that Europe, a strong economic region embracing a 500 million population, is one of the USA’s most important trading partners.

Hamburg port is the export outlet for steel from Salzgitter and aluminum from Trimet Werk shipped to the U.S.

Matthias Boxberger, chairman of Hamburg’s Industry Association, described the U.S. tariffs as a “rude setback” for trans-Atlantic trade relations. “Such conflicts harm all (sides), including the USA itself,” he said, adding that lack of attractiveness of one’s own products cannot be resolved by tariffs against others; unilateral tariffs are not a remedy for the global over-capacity of basic materials such as aluminum and steel.

Hamburg Port’s total export volume of steel and base iron metal accounted for two million tonnes, of which exports of steel and base iron metals to the United States accounted for roughly 70,000 tonnes, according to a spokesman of Hamburg Port Authority.

The prospect of tariffs is worrisome for Hamburg port which is already lagging behind other European ports, and is trying to maximize its ship loads. In the first quarter of 2018, Hamburg port achieved total throughput of 32.7 million tons, down 7.5% over the year-earlier period.

The port is keen to tap its full potential, keeping in mind that mega-ships with larger box capacities are being deployed. Hamburg port’s 2018 first-quarter results show a stabilization trend (+ 0.7%, 1.9 million TEUs) contrasting with Antwerp’s 10.7% growth (2.74 million TEUs) and Rotterdam’s 6.1% growth (3.5 million TEUs).

The Elbe deepening project continues to languish in a state of slow motion, thus precluding the port from tapping its full capacity. Although a German court in November cleared the Elbe deepening project, it has not made any headway so far.

Hamburg port also faces another challenge: the empty container movement at the port, which mirrors the overall trade flow, has recorded an 18% decline year-on-year basis.

The port’s joint chief executive Axel Mattern has been telling the media that a decline in empty container movements was at this point unavoidable, given that ship operators had changed the way they used the port thanks to the Elbe deepening project. Besides the declining empty container movement, the port’s services with the east coast of North America, the Baltic region and the Indian subcontinent had also been declining.

China Trade

The “bright spot”, as freight forwarders in Hamburg point out, is that the port’s trade with China, Hamburg’s biggest trading partner, remained strong with container traffic rising by 4.5% year-on-year. Hamburg port also posted strong growth of 37.7% in container traffic with Brazil, 38.5% with Sweden and 63.8% with Israel.

Other European ports such as Rotterdam and Antwerp – these two ports are already bracing to absorb the impact of Brexit - are also monitoring the Trump administration’s action on steel and aluminum tariffs. Rotterdam Port, Europe’s largest port, recorded in 2017 a 1.3% growth compared to 2016, with the tonnage rising from 461 million tonnes to 467 million tonnes.

Rotterdam posted strong growth in container traffic in 2017, with the number of containers at Rotterdam rising by 10.9% to 13.7 million TEUs. The growth in container handling contrasted sharply with a 2.6% decline in the case of dry bulk goods and 4.1% decline in the case of bulk liquid.

Allard Castelein, the director general of the Rotterdam port operating agency, stated that the throughput, driven by container sector, had “so far, been on the highest level”.

Rotterdam port could also increase its market share to 31%, the highest level since the year 2000, thanks to the growth, particularly, in Asia and South America and imports from North America.

Antwerp port achieved a freight volume of 58,328,678 tonnes in the 2018 first quarter, up 7.1% over the year-earlier period. This volume is the total sum of all freight categories with the exception of conventional breakbulk. The main driver was container freight which posted a 10.7% growth over the year-earlier quarter, rising to 2,744,226 TEUs. Indeed, Antwerp set a new record in March with a container volume of 980,000 TEUs.

There was growth on all sailing routes, both incoming and outgoing. In the first 2018 quarter, a total of 3,531 ships called at Antwerp port, up 0.7% increase over the year-earlier period.