With economic indicators pointing to sustained US consumer goods demand in 2022, and no new vessel capacity of any magnitude scheduled to enter the trans-Pacific, the supply/demand dynamics that were present all last year are projected to continue well into the new year in the largest US trade lane.
Likewise, the port congestion and land-side transportation bottlenecks that plagued retailers and other importers for much of 2021 are likely to continue at least until mid-2022, which means that “effective” vessel and inland transportation capacity will be compromised as well, Alan Murphy, CEO of Sea-Intelligence Maritime Analysis, told JOC.com.
“It will take considerable time to clear the inland congestion, before we can get to clearing the vessel congestion, and we don’t know if the hinterland ‘unclogging’ will take two, four, or six months, or even longer,” Murphy said.
The eastbound trans-Pacific trade is driven primarily by consumer demand for merchandise imports from Asia. US containerized imports from Asia in January through October last year increased 19.5 percent from the same 10-month period in 2020 and 18.9 percent from 2019, according to PIERS.
It is difficult to predict when consumers will shift their discretionary spending from merchandise imports such as clothing, furniture, electronic goods, and sports equipment back to services such as dining out and travel, said Paul Bingham, director of transportation consulting at IHS Markit.
The long-awaited shift of consumer spending to services has yet to materialize due to “enormous uncertainty” surrounding the course of the COVID-19 Delta and Omicron variants, so at least for the first half of 2022, elevated import volumes from Asia should be anticipated, he said.
As 2021 came to a close, consumers showed no indication that their appetite for merchandise had diminished. Total US retail sales rose 1.7 percent from September and 16.3 percent year over year in October, according to the National Retail Federation (NRF).
“Consumers remain in high gear moving into the last months of the year,” Jack Kleinhenz, chief economist at the NRF, said in a November report.
In December, the NRF upgraded its forecast for holiday retail sales, projecting an 11.5 percent bump from November and December 2020, up from a previous projection of 8.5 percent to 10.5 percent year-over-year growth. “Consumers and retailers have both revised their playbooks and broken with previous traditions,” Kleinhenz said of the upgrade. “With the momentum we’ve seen so far likely to continue, it seems probable that we will exceed our initial projection.”
Further, with the US retail inventory-to-sales ratio near its historic low, retailers in the first half of 2022 have no choice but to restock. “They have to get their inventories back up by mid-year before back-to-school [merchandise] starts moving,” Bingham said.
Murphy said that because carriers are not expected to inject any significant capacity into the trade, shippers should expect space to remain tight and on-time vessel performance to improve only modestly.
“We do not expect capacity on the trans-Pacific to increase [in 2022]. As we expect the West Cost to continue to experience varying levels of congestion throughout 2022, we are not hopeful that trans-Pacific schedule reliability will return to the historical level of 60 to 80 percent in 2022,” he said.
Vessel backlogs at major US gateways such as Los Angeles and Long Beach and, to a lesser extent, Savannah and the Northwest Seaport Alliance of Seattle and Tacoma are likely to linger into the new year due to the rash of new services that carriers have deployed in the trans-Pacific, Murphy said. Carriers launched a total of 23 new trans-Pacific loops in 2021, with 19 of them calling the West Coast, according to Sea-Intelligence.
Even though the growth in imports in 2022 is expected to return to low- to mid-single-digit percentages and vessel on-time performance should improve marginally, a return to “normalcy” in trans-Pacific supply chains will occur only when the US fixes its land-side congestion problems, Murphy said.