The Global Shipping Crisis
August U.S. Container Import Volume Ends Record Trend, but Still High
The monthly record-setting streak that U.S. container import volumes have been posting since mid-2020 came to an end this August. While the August number was down slightly compared with the same month in 2021, it remained above 2.5M TEUs, which is still quite high and above the level that has caused port congestion and delays for the last 18 months. A number of factors, such as a slowing economy, inflation and high fuel costs, still have not had the anticipated impact of slowing down U.S. container imports. The combination of increased import volumes from China, persistent delays at major East and Gulf Coast ports and the high number of ships waiting off those ports continues to put pressure on supply chain predictability. The August update of the logistics metrics Descartes is tracking continues to point to congested and challenging global supply chain performance for the rest of 2022.
In this Article...
August finally broke the record monthly trend for U.S. container import volume.
Container imports into the U.S. last month dipped below the year-on-year level (see Figure 1), as TEU volume retreated 1.8% to 2,529,042, though volume was still up 18% from pre-pandemic August 2019. This is the first month since August 2020 that there has not been a record versus the previous year. August 2022 container import volume was relatively flat versus July 2022 with a 0.1% decline.
igure 1: U.S. Container Import Volume Year-over-Year Comparison
Source: Descartes Datamyne™
In August, U.S. container import volumes from China were up 1.4% to 1,008,499 TEUs compared to July 2022 and up 6.3% versus August 2021. Chinese imports in August were the highest of 2022. China represented 40% of the U.S. container import volume, up 0.6% since July 2022.
West Coast ports regained share from East and Gulf Coast ports even though the Port of Los Angeles saw a large decline in container import volume.
East and Gulf Coast ports continued to lead the West Coast ports in volume in August 2022 versus July 2022, but their overall share was lower. Comparing the top five West Coast ports to the top five East and Gulf Coast ports in August 2022 versus July 2022 shows that, of the total import container volume, the East declined slightly in August 2022 to 44.1%, while the West increased to 41.9% in August 2022 from 40.6% in July 2022. The top 10 ports gained share in August 2022 over smaller ports as the top 10 represented 85.9% of all volume, compared with 85.1% in July 2022 and 86.3% year-on-year.
Looking at five-month periods (see Figure 2), the top West Coast ports (orange), with the exception of Seattle, experienced container throughput shifts to other ports, including the East and Gulf Coasts (blue). The Port of New York/New Jersey retook the top spot at 451,190 TEUs in August 2022, up ~41,000 TEUs compared with July 2022. The Port of Los Angeles dropped considerably and came in second at 409,933 TEUs and down ~71,000 TEUs versus July 2022. Long Beach was third, up slightly in August by ~8,000 TEUs.
Figure 2: Container Import Volume Shifts at the Top 10 Ports
Source: Descartes Datamyne
Part of the shift to East Coast ports can be attributed to the growth of Chinese imports and shippers’ decisions based upon last year’s West Coast port congestion. Of the increase in Chinese imports in August 2022 versus July 2022, the Ports of Norfolk, Charleston and New York/New Jersey saw 32.5%, 16.2% and 15.8% growth, respectively. The Port of Los Angeles saw a 16.7% decline, which explains to a great degree why the port’s overall import container volume was down so much.
August port delays remain extended at major East and Gulf Coast ports.
Port delays in August 2022 were consistent with July 2022. The two largest West Coast ports experienced ~7-day delays, but East and Gulf Coast ports remained in the double-digits (See Figure 3). The number of ships waiting off ports according to MarineTraffic/American Shipper decreased overall by 15% to 130 at the end of August 2022, but the percentage of the total waiting off East and Gulf Coast ports increased 11% to 73 in August , reflecting the higher wait times.
Figure 3: Monthly Average Delays (in days) at Top 10 Ports
Source: Descartes Datamyne
Note: Descartes’ definition of port delay is the difference as measured in days between the Estimated Arrival Date, which is initially declared on the bill of lading, and the date when Descartes receives the CBP-processed bill of lading.
Industry and macroeconomic issues persist.
The labor situation remains the same and presents continued risk to port operations. The International Longshore and Warehouse Union (ILWU) contract expired on July 1st; however, business has proceeded as usual with the union working with management. There has been no impact on container processing as has been the case in the past. California law AB5 still remains a significant issue with no resolution in sight and there is a risk that more AB5-related stoppages could occur in other California ports in the future causing greater disruption. The labor uncertainty could be a significant reason why import volumes are not shifting back to major California ports despite their situation improving.
The potential impact of a slowing economy, peak season, inflation and fuel costs are all clouding the view of future import volumes. Despite gross domestic product shrinking for the second quarter in a row, the U.S. economy remains relatively strong. The August Jobs Report was again stronger than expected at 315,000 more jobs filled than anticipated and unemployment inched up to 3.7% due to 344,000 more people seeking work versus July 2022. The impact of peak season demand on container import volumes is unclear as August container import volume was flat versus July and China posted record container volumes into the U.S. Additionally, potential container import volume dampening high inflation rates remain high with the Consumer Price Index increasing slightly by 0.1% to 8.3%. According to the U.S. Energy Information Association, gasoline costs, a significant contributor to high inflation rates, dropped as much as $0.36/gallon in August, but diesel remained stable at $5.12/gallon. Both are still high and likely to remain elevated for the foreseeable future given the disruption of global energy markets as a result of the Russian invasion of Ukraine and subsequent sanctions on Russia.
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Managing supply chain risk: what to watch in the second half of 2022.
The big question on the minds of importers and LSPs remains when, or if, a decline in U.S. import volume will occur in the second half of 2022. In addition, several significant one-time events could exacerbate the ability to move goods globally. Here’s what Descartes will be watching:
- Monthly TEU volumes between 2.4M and 2.6M. This consistently high level will continue to stress ports and inland logistics until infrastructure can be enhanced. August U.S. container import volume was over 2.5M TEU.
- Port wait times. If they decrease, it’s an indication of improved port processing capabilities or that the demand for goods and logistics services is declining. Port wait times stabilized in August, but that isn’t necessarily good news. Higher import volumes at major East and Gulf ports are keeping wait times high and the backlog in ships waiting off ports up.
- Continuing impact of the pandemic. The spread of COVID subvariants continues to add uncertainty to the trajectory of the pandemic and impact supply chains in unpredictable ways as different countries are affected at different times and for different durations. No change in August as many nations have moved to a “live with COVID” mentality, which should help to minimize disruptions; however, China is still maintaining its strict rules and could be subject to supply chain disruptions if new lockdowns emerge in that country.
- Key economic indicators such as the inflation rate, monthly BLS Jobs Report, FRED Inventory to Sales Ratio and FRED Personal Consumption Expenditure: Durable Goods. A fundamental change in consumer buying behavior from services to goods occurred early in the pandemic and was the force behind the dramatic increase in U.S. container import volumes over the last two years. The August numbers for the economy and jobs are somewhat conflicting and do not yet appear to be materially impacting U.S. imports.
- ILWU contract negotiations. The ILWU contract has expired, but to date there hasn’t been an impact on West Coast port operations; however, California AB5 has the potential to cause more disruptions to California port operations.
- Inflation and the Russia/Ukraine conflict. Inflation may be the only way to slow down the strong U.S. economy and ultimately help to alleviate the global logistics capacity-related problems that exist. Inflation remained high and was slightly higher in August and the effect of the Russia/Ukraine conflict on fuel costs continues.
Consider recommendations to help mitigate pressure of ongoing global shipping disruptions.
August 2022 was flat versus July 2022 for U.S. container import volumes, notably not another record versus 2021, but still high. The U.S. economy remains relatively strong despite numerous pressures to slow it down. Overall, ports are continuing to process large volumes of containers. However, the major East and Gulf Coast ports are struggling to keep up with the volume as delays have not decreased and there are still many ships waiting at sea to berth. Combined with labor-related issues, this could continue to make managing supply chain performance more complex. This data reaffirms that it will be some time before the pressure on supply chains and logistics operations begins to lift. Descartes will continue to highlight key Descartes Datamyne, U.S. government and industry data in the coming months to provide insight into the global shipping crisis. We are staying the course with our current perspectives and recommendations:
- Monitor the impact of California law AB5 on owner-operators serving California ports for potential disruption or degradation of port container processing performance.
- Monitor ILWU contract negotiations for progress.
- Track the spread of COVID variants to determine when they will hit critical parts of the supply chain, especially in China and other countries with severe containment policies.
- Track ocean shipments as increasing port delays and number of ships waiting off ports makes managing supply chains more difficult.
- Watch port delays on the East and Gulf Coasts.
- Evaluate the impact of inflation and the Russia/Ukraine conflict on logistics costs and capacity constraints. Ensure that key trading partners are not on sanctions lists.
- Shipping capacity constrained? Rationalize SKUs to ship higher velocity and margin goods to maximize profitability.
- Focus on keeping the supply chain resources you have, especially drivers. The old adage “a bird in the hand is worth more than two in the bush” definitely applies here. Building trips to reduce stress and improve quality of life to retain drivers is now as or more important than wage increases.
- Reevaluate the flow of goods as major East and Gulf Coast ports are now experiencing greater delays and the Ports of Los Angeles and Long Beach are seeing significant reduction in wait times.
- Continue to look for less congested transportation lanes including smaller ports to improve supply chain velocity and reliability. Total transit time is important, but so is supply chain predictability. Evaluate alternative transportation lanes into the U.S., including entry through northern and southern borders and inland ports.
- Evaluate supplier and factory location density to mitigate reliance on over-taxed trade lanes and regions of the globe that are potentials for conflict. Density creates economy of scale but also risk, and the pandemic and subsequent logistics capacity crisis highlight the downside. Conflicts do not happen “overnight” so now is the time to address this potentially business disrupting issue.
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