Import Surge Sets New Baseline For Eastbound Trans-Pacific Volume

Year-over-year growth in US imports from Asia slowed in July from the previous month, but the 13th consecutive month of annual growth in volume is yet another sign that a new baseline has been established in the eastbound trans-Pacific.

Imports from Asia rose 7.9 percent year over year and 8.7 percent from the same month in pre-pandemic 2019 in July, the last month before the largest US trade’s traditional August through October peak shipping season, according to PIERS.

That’s a red flag for container ports and the overland supply chains to which they connect, which are already stretched to the maximum handling current cargo volumes. The ports of Los Angeles and Long Beach, which together handle appproximately 50 percent of US imports from Asia, are already witnessing deterioration in key performance indicators such as vessels at anchor awaiting berthing space, excessive container dwell times at marine terminals, and increasing truck turn times at terminal gates.

July marked the first month since July 2020 that imports from Asia did not increase by double-digit percentages on a year-over-year basis, due to increasingly strong comparisons in the second half of 2020, when trans-Pacific volumes sprang back to life after dropping sharply during initial COVID-19 lockdowns in the spring.

The share of US imports from Asia handled by West Coast ports increased to 61.7 percent in July from 59.9 percent in June as carriers deployed new trans-Pacific services and extra-loader vessels in Southern California and the Northwest Seaport Alliance of Seattle and Tacoma. The market share of East Coast ports declined to 31.8 percent in July from 33.7 percent in June, and the market share of US imports from Asia at Gulf Coast ports increased to 6.3 percent from 6.1 percent in June. The West Coast’s market share had been consistently below 60 percent in January through May, but is expected to stay at 60 percent or higher in the coming months as carriers add more extra-loaders to their West Coast services than to their East Coast services through the peak season.

Long Beach had 11 extra-loader calls in July and Los Angeles had seven, according to port spokespersons. Long Beach said 13 extra-loader calls are scheduled so far for August. The Los Angeles projection was not immediately available.

Noel Hacegaba, deputy executive director and COO at the Port of Long Beach, said five ad-hoc vessels calls are already scheduled for September, with more likely to materialize. What’s more, if demand continues apace and carriers are able to secure additional capacity in a tight market for vessels, Hacegaba said carriers may make those temporary calls into more permanent liner services.

“These services are backed by large NVOCCS [non-vessel-operating common carriers] in China, which cater to demand that cannot be fulfilled by regular services. These services are fortnightly for now, but lines are prepared to scale up as market conditions change,” Hacegaba said.

At the individual port level, July’s import volumes reflect developments over the past year as retailers first concentrated their imports in Los Angeles-Long Beach, which serves the second-largest consumer market in the US and has intermodal rail connections to distribution hubs in the eastern half of the country. However, as congestion built in Southern California last fall, more imports were directed to ports such as the Seattle-Tacoma Northwest Seaport Alliance (NWSA), Savannah, Charleston, Norfolk, New York-New Jersey, and Houston.

As a result, imports from Asia moving through Los Angeles-Long Beach increased only 0.1 percent year over year in July, compared with 24.3 percent growth at the NWSA, 12.1 percent in New York-New Jersey, 26 percent in Savannah, 39.4 percent in Houston, 22.3 percent in Norfolk, and 55.9 percent in Charleston.

Going forward retailers project continued strong import volumes, although year-over-year growth rates will return to single-digit or even turn negative as volumes at all major gateways are compared to record and near-record volumes in the second half of 2020. Global Port Tracker, which is published by the National Retail Federation (NRF) and Hackett Associates, projects that after a 12.6 percent increase in imports in this month, imports will increase 4.9 percent in September, and will decrease 3 percent in October, as October 2020 at the time was the busiest month ever for US imports.

However, whether year-over-year import volumes increase slightly or decrease slightly for the remainder of the year, PIERS numbers show that a new floor for import volumes has been established. That baseline is approximately 30 percent higher than over the past two years and can be attributed primarily to the rapid growth in online shopping during the pandemic. Unlike in-person shopping at stores, which fluctuates seasonally, online shopping is much steadier and requires constant replenishment of inventory.

NVOs began forecasting as far back as last fall that a new baseline for imports from Asia was developing based upon online shopping and the need for steady replenishment of inventories. Even as retailers were bringing in their 2020 holiday season merchandise, they were also replenishing their inventories for online purchasing beyond the holidays.

Seasonal back-to-school and holiday shopping will simply pile additional volumes onto the new, higher baseline, which means that supply chains will be taxed to the maximum this peak season. In other words, shippers should expect further disruptions and delays, according to the NRF.

Source: Journal of Commerce