US container imports surge
US container imports surged to “unexpected” high levels this summer and may have hit a new record, as the US economy continues to reopen and retailers stock up for the holiday season, according to the monthly Global Port Tracker report by the National Retail Federation (NRF) and Hackett Associates.
US ports covered by Global Port Tracker handled 1.92 million TEU in July, the latest month for which after-the-fact numbers are available. That was down 2.3%, year-over-year, but up 19.3% from June and significantly higher than the 1.76 million TEU forecast a month ago.
Those figures are consistent with a recent Lloyd’s List survey of nine leading US ports, which showed a collective 19.5% uptick in containerised imports for July.
According to the Global Port Tracker, August’s US import volumes are estimated at 2.06 million TEU, a 6% year-over-year increase. Actual August numbers won’t be known until next month, but that would be an all-time high, beating the previous record of 2.04 million TEU set in October 2018, the report noted.
September is forecast at 1.89 million TEU, up 1.1%, year over year; October at 1.71 million TEU, down 9.2%; November at 1.58 million TEU, down 6.8%, and December at 1.53 million TEU, down 11%.
Those numbers would bring 2020 to a total of 20.1 million TEU, a drop of 6.7% from last year, still the lowest annual total since 19.1 million TEU in 2016. The first half of 2020 totalled 9.5 million TEU, down 10.6% from last year.
The forecast estimates volumes of 7.58 million TEU during the July-October “peak season” when retailers rush to bring in merchandise for the winter holidays, making 2020 the third-busiest peak season on record following 7.7 million TEU in 2018 and 7.66 million TEU last year, the report noted. January 2021 is forecast at 1.6 million TEU, down 12% from January 2020.
Despite the apparent improvement in import confidence, NRF vice president for Supply Chain and Customs Policy, Jonathan Gold said the figures should be viewed with some caution, noting: “It’s important to be careful how much to read into these numbers after all we’ve seen this year, but retailers are importing far more merchandise for the holidays than we expected even a month ago.
“Some of these imports are helping replenish inventories that started to run low after consumers unleashed pent-up demand when stores reopened. But this is the clearest sign yet that we could be in for a much happier holiday season than many had thought.”
Hackett Associates founder Ben Hackett said: “The economy has come into sharp focus, and for good cause. The previous yo-yo pattern of import levels reached a peak in July that appears to have extended into August. Nonetheless, data from around the globe is a mix, with a weak recovery as Europe struggles with rising COVID-19 numbers; but China’s exports remain solid.
“Will this last? A lot of uncertainty is in play.”
Global Port Tracker, which is produced for NRF by the consulting firm Hackett Associates, provides historical data and forecasts for the US ports of Los Angeles/Long Beach, Oakland, Seattle and Tacoma on the West Coast; New York/New Jersey, Port of Virginia, Charleston, Savannah, Port Everglades, Miami and Jacksonville on the East Coast, and Houston on the Gulf Coast.
As reported in Lloyd’s Loading List, shipping association BIMCO this week warned that the recent rebound in ocean freight volumes, particularly on the transpacific, could be masking what may turn out to be a long and slow recovery for the container sector.
“The container shipping industry is particularly vulnerable to changes in consumer spending, which has been severely impacted by lockdowns across the world,” BIMCO chief shipping analyst Peter Sand said in his latest outlook for the sector.
While volumes were hit hardest in April and May, in line with the strict lockdowns in place at the time, over the first half of the year liftings were down 6.9%.
Underlying demand weak
“Though volumes have started to recover, actual demand for goods is still considerably down,” Sand said. “The high rates are testament to shippers again frontloading their goods, this time ahead of a potential second wave of coronavirus around the world and resulting lockdowns.”
While frontloading occurred ahead of an increase in tariffs because of the trade war in 2018, total retail sales in the US, excluding food and beverages, were down 1.3% in the first six months of this year and there the risks of higher unemployment and lower consumer incomes are looming as governments unwind state support programmes.
“Even the higher state support was unable to stop consumer spending falling in the major consuming nations of the world, and, as this comes to an end, spending is likely to suffer even more, lowering demand for container shipping,” Sand said.
“The effects of this lower actual demand on container shipping will be more painful given the frontloading that we are currently seeing, which will depress volumes and freight rates in the future.”
BIMCO said while new housing starts in the US, a signal of economic confidence, were higher than they were a few months ago, they still remained 4.5% below where they were in February this year.
Rates remain resilient
Despite capacity now being close to or above last year’s levels, and although demand remains low, container freight rates remained resilient, which had helped carriers to the achieve their most profitable second quarter results since 2010.
“Across the board, major carriers have announced strong results for the first half of the year, despite volumes falling,” Sand said. “This has so far been achieved by the stable freight rates and the cost savings from cheaper bunkers, blanking sailings, and returning ships to tonnage providers.”
But capacity management had been the key to success and as capacity is reinstated without a permanent recovery in demand, carriers would find themselves balancing on a “thin tightrope” between maintaining market share and freight rates.
This would happen while the fundamental balance in the market deteriorated as the fleet grew by 2% and demand falls, said Sand.
“BIMCO expects freight rates to fall in the near future unless capacity adjustments are constantly made to rebalance the market.”
© 2019 Worldfreightrates News