Following bumper growth in the second and third quarters, box traffic from Asia to the Mediterranean finished last year with a bit of a whimper. Shipments in the fourth quarter rose by only one percent year on year as a decent performance in the East Med region was effectively wiped out by a sudden slump to West Med imports.

Asian exports to the East Med increased by five percent in the fourth quarter, only about half the year-on-year rates that were achieved in the two previous quarters, according to the latest data release from Container Trade Statistics. However, while there was still growth in East Med, the West Med trade went into reverse, falling by 3.4 percent to register the first decrease in nine quarters.

Despite the weaker than expected end to the year, based on CTS’ first release combined Asia to East and West Med volumes reached 5.5 million TEU last year, an increase of 4.4 percent on 2016. That figure maintains the healthy trend for westbound volumes into the Mediterranean, which have added approximately 1.1 million TEU since 2012.

The East Med countries making the biggest contributions to last year’s higher westbound trade were Turkey, Ukraine, and Slovenia, which between them were responsible for approximately 110,000 TEU of the additional 150,000 TEU imported into the region from Asia. Trade to Turkey and Ukraine last year benefitted from (relative) stabilization on the political and social fronts. Should conditions improve further there is every reason to expect further gains in container traffic, although it is unlikely to be at the same breakneck pace seen last year.

Another strife-ridden country, Egypt, is yet to emerge the other side in relation to inbound container volumes. Some 50,000 TEU of Asian imports to the country was lost in 2017 (from 311,000 TEU in 2016), as a number of IMF-mandated austerity reforms weakened consumers’ spending power, from the introduction of VAT to currency devaluation. Damage to the country’s tourism industry from terrorist attacks also played a role in lowering inbound shipments.

There are signs that the worst is over; foreign reserves and consumption are rising, while inflation has fallen, boding well for a container recovery this year, although next month’s presidential elections could set things back if they trigger another round of social and political unrest.

Growth in the West Med stemmed almost exclusively to the three largest markets: Italy, Spain and France. The West Med power trio collectively added about 105,000 TEU in Asian imports to the region, which saw its annual net addition shrink to about 75,000 TEU on account of losses elsewhere, most notably in North Africa where Libya’s inbound trade saw a 15 percent decline (to ~55,000 TEU) and Algeria decreased by 7 percent (to ~295,000 TEU).

Containership capacity in the westbound Asia to Mediterranean route continues to rise incrementally, driven by the cascade of bigger ships into the market rather than new service starts. Drewry research indicates that effective monthly capacity will pass 600,000 TEU in March, which would represent an increase of nearly 20 percent over the same month in 2017. There is unlikely to be any let up in the ship upgrading process this year as newbuild deliveries for the Asia-North Europe trade will displace exiting tonnage into new territories, with Asia-Med being a leading recipient.

Asia-Med spot rates, as elsewhere, have mounted their usual pre-Chinese New Year comeback. Drewry’s World Container Index last week reported a Shanghai to Genoa benchmark rate of $1,650 per 40ft container, a rise of around 40 percent against the going rate at the end of 2017. We expect rates to soften now that the factories are shuttered for the festivities, before stabilising through the rest of the year.

Despite a general softening in Asia to Mediterranean trade at the end of 2017, we remain confident that this will be one of the better performers in 2018 thanks to improving conditions in major importing countries such as Turkey, the Ukraine and Egypt.