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Supply chain in 2023: Normalcy returns, can West Coast rebound?

Import volumes fell below 2 million TEU in November, according to NRF's Global Port Tracker.

red and blue cargo containers
Photo by Barrett Ward on Unsplash

In the supply chain, a new milestone was reached at the nation’s ports in November: Import cargo volume at the nation’s busiest ports fell below 2 million Twenty Unit Equivalents (TEUs), a measure which describes a 20-foot container or its equivalent.

After clogged supply chains in 2021 gave way to record volumes when bottlenecks eased up last year, import levels have been falling in recent months as more capacity opened up in shipping channels. Container prices plummeted along with it.

To start 2023, import levels are expected to remain at that level for most of the spring, according to the latest Global Port Tracker report from the National Retail Federation and Hackett Associates.

“Ports have been stretched to their limits and beyond but are getting a break as consumer demand moderates amid continued inflation and high interest rates,” said NRF Vice President for Supply Chain and Customs Policy Jonathan Gold, in a statement. “Consumers are still spending and volumes remain high, but we’re not seeing the congestion at the docks and ships waiting to unload that were widespread this time a year ago.”

After falling when the economy shut down in the first weeks of the pandemic, import levels first rose above 2 million TEU in August of 2020. They stayed above that level for more than two years, save for one month.

It’s a sign of pre-pandemic dynamics returning in the systems that are responsible for transporting goods.

“After nearly three years of COVID-19’s impact on global trade and consumer demand, import patterns appear to be returning to what was normal prior to 2020,” Hackett Associates Founder Ben Hackett said. “Nonetheless, as inflation eases and consumer spending returns, we project that growth will slowly return going into the second half of the year.”

The latest data from the Global Port Tracker is as follows:

  • In November, ports handled 1.78 million TEU, down 11.3% from October and 15.8% from November 2021. The last month to fall below 2 million was February 2021.
  • In December, the projected total is 1.88 million TEU. Final numbers have not yet been reported.
  • 2022 as a whole is expected to fall just shy of 2021’s record of 25.8 million TEU, with 25.7 million TEU.
  • Looking ahead, the Global Port Tracker forecasts that volumes will hit a low in February 2022 before import levels rise back to 2 million in May.

Will West Coast ports regain their lead?

Looming over supply chain discussions for 2023 is a big question: Will activity at West Coast ports pick back up?

The queue of ships off the coast of Los Angeles was the prime example of supply chain congestion, and it was finally cleared in November 2021. However, many logistics managers diverted ships to other U.S. ports on the East Coast as they sought to avoid the wait. At the same time, labor negotiations between a key longshoreman’s union and managers at the California ports remain unsettled.

It all resulted in the Port of New York and New Jersey overtaking the Los Angeles and Long Beach ports as the top traffic-getter for the last three months, including during peak holiday shipping season in the fall.

A recent CNBC survey of 341 managers laid out the current uncertainty among supply chain managers:

Nearly a third of logistics managers at major companies and trade groups say they do not know how much trade they would return to the West Coast once an International Longshore and Warehouse Union, or ILWU, labor deal is reached, according to CNBC’s supply chain survey.

Eighteen percent of respondents said they would bring back 10% of their diverted trade, another 12% surveyed said they would bring back 20% of the trade they moved away, and another 12% were more bullish, saying they would bring back 60% of their diverted trade.

…Of those surveyed, 49% said they did not divert trade, compared to 40% who said they did.

This remains one dynamic of shipping that is not yet back to normal. As congestion eases up, the finalizing of a labor deal would likely provide a boost. On the other hand, an expanded Panama Canal and more embrace of nearshoring could create conditions for this eastward shift to be one of the lasting changes of the pandemic period of supply chain chaos.

Even with conditions eased up, managers should continue to monitor developments in the supply chain closely for potential savings, and efficiency.

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