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U.S. import levels rose to record volumes during the pandemic, then descended to a winter lull over the last two quarters. Now, they’re returning to a pre-pandemic state of normal.
That’s according to the latest edition of the Global Port Tracker from the National Retail Federation and Hackett Associates.
For February, which is the latest month for which data is available, Twenty-Foot Unit Equivalents, or TEUs, were down 14.4% from the prior month, and 26.8% year-over-year. February is typically the slowest month of the year, as retailers are in a post-holiday lull and Lunar New Year celebrations close factories in China. Yet this month’s volume of 1.55 million TEU was the lowest since May 2020, when the pandemic closed many factories and stores.
The Tracker projects that March will have a similar showing, falling 28.2% year-over-year. These declines are unusually large, but are coming because of the record highs posted in 2022.
Still, they show that import levels are settling back into historical norms. April is forecast to see 1.86 million TEU. That’s about on par with the monthly average for imports in 2019.
“Last spring and summer were the busiest ever as consumers spent freely and retailers brought in merchandise to meet demand,” said NRF Vice President for Supply Chain and Customs Policy Jonathan Gold, in a statement. “This year won’t repeat that, but the numbers we’re expecting would have been considered normal before the pandemic.”
The slowdown in imports has been coupled with a dramatic fall in freight rates. According to the Drewry World Container Index, the price of a 40-foot container is now $1,710. That’s 84% below the peak of $10,377, which was reached in September 2021.
“Compared with last year, the flow of import containers on the West Coast continues to decline along with demand as carriers increasingly drop service to Los Angeles-area ports but stretch voyages to include other ports of call to help absorb excess capacity,” Hackett Associates Founder Ben Hackett said. “Meanwhile, freight rates have been impacted by the fall in demand, but new ships are starting to show up and more have been ordered – a sign that carriers expect demand will improve by the time the new vessels are delivered.”
While the volume totals are showing signs of moving past the disruptions of the last two years, labor negotiations on the West Coast ports still remain unresolved. This raises the specter of a potential disruption. Contract negotiations have been stalled between the International Longshore and Warehouse Union and the Pacific Maritime Association.
Workers mostly remained on the job since the last agreement expired July 1, but cracks are starting to show as tensions rise. On Thursday and Friday, the ports of Los Angeles and Long Beach were shuttered as a result of manpower shortages that stemmed from the labor dispute. These are the nation's largest ports, so it will leave some cargo in limbo heading into the Easter weekend. Throughout the year, some cargo has been shifted to other ports on the East Coast and elsewhere to avoid any issues.
"The priority at the moment is resolving labor negotiations at the West Coast ports and avoiding any self-inflicted supply chain challenges on top of those we’ve faced the past three years," Gold said.
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Labor disputes on the West Coast could cause further disruption heading into peak season.
When the first half of 2023 is complete, imports are expected to dip 22% below last year.
That’s according to new data from the Global Port Tracker, which is compiled monthly by the National Retail Federation and Hackett Associates.
The decline has been building over the entire year, as imports dipped in the winter. With the spring, volume started to rebound. In April, the major ports handled 1.78 million Twenty-Foot Equivalent Units. That was an increase of 9.6% from March. Still it was a decline of 21.3% year over year – reflecting the record cargo hauled in over the spike in consumer demand of 2021 and the inventory glut 2022.
In 2023, consumer spending is remaining resilient with in a strong job market, despite the collision of inflation and interest rates. The economy remains different from pre-pandemic days, but shipping volumes are beginning to once again resemble the time before COVID-19.
“Economists and shipping lines increasingly wonder why the decline in container import demand is so much at odds with continuous growth in consumer demand,” said Hackett Associates Founder Ben Hackett, in a statement. “Import container shipments have returned the pre-pandemic levels seen in 2019 and appear likely to stay there for a while.”
Retailers and logistics professionals alike are looking to the second half of the year for a potential upswing. Peak shipping season occurs in the summer, which is in preparation for peak shopping season over the holidays.
Yet disruption could occur on the West Coast if labor issues can’t be settled. This week, ports from Los Angeles to Seattle reported closures and slowdowns as ongoing union disputes boil over, CNBC reported. NRF called on the Biden administration to intervene.
“Cargo volume is lower than last year but retailers are entering the busiest shipping season of the year bringing in holiday merchandise. The last thing retailers and other shippers need is ongoing disruption at the ports,” aid NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said. “If labor and management can’t reach agreement and operate smoothly and efficiently, retailers will have no choice but to continue to take their cargo to East Coast and Gulf Coast gateways. We continue to urge the administration to step in and help the parties reach an agreement and end the disruptions so operations can return to normal. We’ve had enough unavoidable supply chain issues the past two years. This is not the time for one that can be avoided.”