Can we tell how healthy the world's business is performing by watching what goes in and out of Europe's biggest port? The Economist ponders ....
Europe’s biggest port is a barometer of the world economy
UNLESS you are a hermit, you own and consume things that have passed through the port of Rotterdam. Last year the port handled 466m tonnes of cargo, more than double the amount of Europe’s second port, Antwerp. The endless shifts in the size and composition of these flows provide an instant indicator of the state of the world economy. And the trends that are transforming the port’s operations—automation and the shift away from fossil fuels—give a sense of the future too.
Thanks to its easy access for big ships from the Atlantic and for barges from the interior, Rotterdam has been Europe’s dominant port for much of modern history. Its success is man-made: in the mid-19th century, when the Ruhr region of Germany was industrialising, Rotterdammers dug a channel to connect the Maas river, which runs through the city, to the Rhine, creating the most shipworthy route from Europe’s industrial heartland to the North Sea.
The port has been evolving in sympathy with the global economy ever since: in the mid-20th century, new handling and storage facilities for oil and chemicals were built to cater to the post-war boom. As globalisation gathered pace in the 1990s and 2000s, the port expanded further into the sea, to provide berths for the mega-ships bringing sneakers and flat screens from Asia to Europe.
Activity at the port today bears witness to four trends currently shaping the world economy: the low price of oil, slow growth in China and emerging markets, the sluggish euro-area recovery and the global slowdown in manufacturing and trade. From his office overlooking the Maas, Eelco Hoekstra, the boss of Vopak, the world’s largest independent storage company of “all things liquid”, sees the physical manifestation of movements in energy markets sailing by each day.
In 2014, he recalls, when fracking was flooding America with cheap natural gas, huge cargoes of American coal suddenly started floating past. Gas was displacing coal in America but remained expensive in Europe, since America had little export capacity. So European utilities began snapping up the unwanted American coal instead: more of it was exported to the Netherlands than to any other country in 2014 and the first half of 2015.
Soon after, the price of oil collapsed. Big consumers expected a relatively prompt revival, however, judging by the price of futures contracts. Rotterdam’s vast storage tanks quickly filled, as traders bought cheap crude on the spot market and sold futures at a higher price, locking in a profit. The low oil price, meanwhile, has helped pad margins at refineries and chemical plants, spurring a flurry of activity in Rotterdam’s sprawling industrial complexes.
The oil price fell thanks in part to slowing growth in China, which is also evident in the sudden appearance of Chinese ships offloading surplus steel. This in turn means fewer barges are taking iron ore down the Rhine to German steel mills. Declining sales of German cars in China compound the problem, as carmakers consume less steel. The drop in shipments of bulk goods arriving in Rotterdam, says Allard Castelein, CEO of the port, is a direct result of this baleful cycle.
Hit the link at the top to read the rest. This is fascinating.