NEW YORK: Retailers project that U.S. containerized imports from Asia this month will rise only 3.3 percent year-over-year, a further sign that what normally is the busiest month of the annual peak season in the eastbound Pacific will be only a “bump” this year.
The Global Port Tracker, published each month by the National Retail Federation and Hackett Associates, stated that the “stubbornly high” inventory-to-sales ratio throughout the retail sector has placed a cap on merchandise imports for the remainder of 2015.
This same sentiment was expressed Thursday by Shawn Tureman, director of domestic intermodal marketing at Norfolk Southern, at the annual JOC Inland conference in Memphis. “If you do find peak, let me know,” he said.
Global Port Tracker noted that imports increased 8.1 percent year-over year in July. In August, traditionally the beginning of the peak shipping season in the eastbound Pacific, containerized imports through all major U.S. import gateways increased 10.4 percent over August 2014.
The August numbers measure actual container volume, while its October numbers are a projection.
Import volume growth this year has been solid but unspectacular. Global Port Tracker said containerized imports were up 6.5 percent in the first half of 2015. The full year projection is for 5.7 percent growth.
Economist Mario O. Moreno forecasts import volume at all U.S. ports, including smaller gateways not included in the Port Tracker figures, will rise 6.6 percent this year, to a record 20.2 million 20-foot-equivalent units.
High inventory levels are acting as a drag on both ocean imports and domestic freight moving by truck and rail, speakers at JOC Inland noted. “I think we have seen the peak, so what you see now is what you’ve got for the rest of the fall season,” said David Congdon, vice chairman and CEO of Old Dominion Freight Line.
Although containerized imports for the rest of 2015 will most likely be uninspiring, January and February 2016 will look like blockbuster months. Global Port Tracker projects an increase of 16.5 percent in January and 12.9 percent in February. Those numbers, however, will be inflated by comparisons with weak volumes in early 2015, when West Coast ports were hobbled by lowered productivity during longshore labor negotiations.
The port gridlock during before the Pacific Maritime Association and the International Longshore and Warehouse Union agreed on a contract on Feb. 20 caused vessels and their cargoes to back up outside West Coast ports.
East Coast ports reaped a bonanza in rerouted shipments during the first several months of this year, but as West Coast congestion has faded, a substantial amount of the volume has returned to its traditional gateways. East Coast ports such as New York-New Jersey and Savannah are reporting year-over-year growth, but not the double-digit increases seen during the first half of the year.
West Coast ports’ share of Asia cargo rose almost three percentage points in July compared with June, reaching 70 percent, while East Coast ports lost 3 percent in market share, according to PIERS, a sister product of JOC.com within IHS.
Retailers’ decision to ship holiday goods early this year, knowing that inventories would build up and inventory carrying costs would increase, does not necessarily mean that a new supply chain model has been established.The West Coast ports have experienced relative labor calm in the second half of the year, and this condition should continue at least until the new ILWU-PMA contract expires on July 1, 2019. This should give retailers more confidence to return to normal shipping patterns next year.
Also, if the Federal Reserve begins to raise interest rates next year, as expected, it will have an immediate impact on inventory carrying costs, which will discourage some early shipping. Traditionally in the eastbound Pacific, lower-cost imports such as Christmas decorations move during the summer and early fall, with East Coast ports grabbing a higher share of imports that are not time-sensitive.
However, as the holidays approach, retailers bring their higher-value imports in through West Coast ports, where the combined ocean and intermodal rail transit time saves importers at least a week to 10 days to interior destinations compared to the East Coast routing. That is why October is normally the busiest month of the year in the eastbound Pacific.
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