How till the Energy Crisis in Europe Affect Freight Markets?
As the euro zone slows, this may pull ocean container rates down further. EU and U.K sanctions against Russian energy has created increased volatility in European power markets. There is potential that the imposed retaliation for Russia’s invasion of Ukraine may soon cool off but only after affecting the entire continent’s economy.
On Monday, U.K. Prime Minister Liz Truss announced plans to cap household energy bills at the equivalent of $2,300 annually. Meanwhile, German Chancellor Olaf Scholz unveiled a 65 billion euro relief package to ease the pain of energy prices that have quadrupled in his country.
In order to reduce the economic damaged caused by the natural gas supply crunch, crisis measures are being put in place after the cancellation of Nordstream 2 and Russia’s shutdown of Nordstream 1. This is potential for these historically high energy prices to sap consumer’s ability to spend money on all other goods and services.
“We see scope for the introduction of price caps in power generation, which we estimate could save Europe c.€650 bn pa.Yet, price caps would not fully solve the affordability issue: the increase in energy bills would still be of +€1.3 tn, or c.10% of GDP, we estimate.”
Alberto Gandolfi, Goldman Sachs Analyst
Rates for ocean containers from Asia to Europe have been falling dramatically all this year and recently have dropped significantly since the beginning of August.
The Freightos Baltic Daily spot rate from China to North Europe, displayed in white in the chart above, has fallen 24% since July 3, from $10,397.55 per forty-foot equivalent unit to $7,869.10. Drewry’s spot rate from Shanghai to Rotterdam, Netherlands, displayed in green, dropped 18% over the same period, from $9,280 per FEU to $7,583.
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