The Global Shipping Crisis
September U.S. Container Import Volume Drops, but Delays at East and Gulf Coast Ports Remain High
U.S. container import volumes in September moved closer to pre-pandemic levels, but the volume decrease did not have a measurable impact on port delays, especially for East and Gulf Coast ports. A number of factors, such as a slowing economy, retailers reducing purchases, inflation and high fuel costs are finally making an impact on U.S. container imports as September volume was a significant adjustment from August and September 2021. Much of the drop was related to a decrease in Chinese imports, which has the greatest impact on the two major West Coast ports. The September update of the logistics metrics Descartes is tracking shows the potential for relief but continues to point to congested and challenging global supply chain performance for the rest of 2022.
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September U.S. container imports were significantly lower than traditional volumes marking the start of peak season wind down.
Excluding 2020, September is traditionally the month when peak season container import volume begins to decline; however, imports into the U.S. last month dipped significantly below the year-on-year level (see Figure 1). September 2022 TEU volume retreated 11.0% versus September 2021 to 2,215,731, though volume was still up 9% from pre-pandemic September 2019. September volume was also down significantly versus August 2022 with a 12.4% decline.
figure 1: U.S. Container Import Volume Year-over-Year Comparison
Source: Descartes Datamyne™
All of the top 10 U.S. ports felt the effects of the decline. At some ports, the decrease in import volume was minimal, like the 2% drop at the Ports of New York/New Jersey, while at others, like the Ports of Los Angeles and Long Beach, volumes dropped by over 17%. The Port of Savannah saw a significant decline of 21.5%, but that was due to Hurricane Ian (see Figure 2).
Figure 2: August to September Comparison of Import Volumes at Top 10 U.S. Ports
Source: Descartes Datamyne
In September, U.S. container import volumes from China were down 18.3% to 820,329 TEUs compared to August 2022 and down 22.7% versus August 2021. Chinese imports in September were the lowest of 2022, representing 37% of the month’s volume, down 3% from August 2022. China represented 61.5% of the total decline in U.S. container import volume; however, only two of the top 10 countries importing into the U.S., India and Germany, saw volume increases (see Figure 3).
Figure 3: August to September Comparison of U.S. Import Volumes from Top 10 Countries of Origin
Source: Descartes Datamyne
Decline in Chinese import volume significantly impacts share at West Coast ports; share at major East and Gulf Coast ports rises to almost half of U.S. container imports.
In September, East and Gulf Coast ports expanded their lead in volume over West Coast ports versus August 2022, and their overall share of imports was much higher. Comparing the top five West Coast ports to the top five East and Gulf Coast ports in September 2022 versus August 2022 shows that, of the total import container volume, the East increased in September to 48.2%, up 4.1% over August, while the West decreased to 37.0% in September from 41.9% in August. The top 10 ports lost some share in September 2022 to smaller ports, as the top 10 represented 85.2% of all volume compared with 85.9% in August 2022 and 87.1% year-on-year.
Looking at five-month periods (see Figure 4), the top West Coast ports (orange) experienced container throughput shifts to other ports, including the East and Gulf Coasts (blue). The Port of New York/New Jersey remained the top spot at 427,636 TEUs in September 2022. The Port of Los Angeles came in second at 339,027 TEUs and Long Beach was third at 313,019 TEUs.
Figure 4: Container Import Volume Shifts at the Top 10 Ports
Source: Descartes Datamyne
September port delays remain extended at major East and Gulf Coast ports.
Overall port delays in September 2022 were lower than August 2022. The two largest West Coast ports (Los Angeles and Long Beach) experienced <7-day delays, but East and Gulf Coast ports remained in the double-digits (See Figure 5).
Figure 5: 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 unchanged 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.
While key economic indicators are pointing to a softening economy, they are not all aligned. Despite gross domestic product shrinking for the second quarter in a row, the U.S. economy remains relatively strong. The October Jobs Report was again strong with 263,000 more jobs filled than anticipated and unemployment moved to 3.5%, which as we have stated before is a historic low number. According to the U.S. Energy Information Association, gasoline costs, a significant contributor to high inflation rates, dropped only slightly in September, but diesel declined $0.28 to $4.84/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, subsequent sanctions on Russia and recent steps by OPEC to curtail production.
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Managing supply chain risk: what to watch in the remaining months of 2022.
The decline in U.S. import volume has finally started and now the question for the rest of 2022 is whether or not decreases will continue through the end of the year. 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 level will continue to stress ports and inland logistics until infrastructure can be enhanced. September U.S. container import volume dropped to 2.2M 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 were down slightly in September, but were still much higher on the East and Gulf Coast ports and certainly not commensurate with the decline in volume.
- 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 September 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 September numbers for the economy and jobs conflict somewhat with inflation figures and fuel prices.
- 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. There was no change in September.
- 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 September and, while diesel costs receded, both diesel and gas prices remain high due to the effect of the Russia/Ukraine conflict and now OPEC.
Consider recommendations to help mitigate the pressure of ongoing global shipping disruptions.
September 2022 U.S. container import volumes declined sharply versus August as market headwinds finally made an impact. The U.S. economy remains relatively strong despite numerous pressures to slow it down. Overall, ports are continuing to process large volumes of containers. The reduction was felt more on West Coast ports, as major East and Gulf Coast ports continued to be challenged with delays that have not decreased. While West Coast ports are looking less constrained, especially due to the reduction in Chinese imports, labor-related issues are not yet incenting importers to move volume back. 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.
- 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 have the potential for conflict. Density creates economy of scale but also risk, and the pandemic and subsequent logistics capacity crisis highlights the downside. Conflicts do not happen “overnight” so now is the time to address this potentially business disrupting issue.
Note: This report uses the initial compiled release of U.S. Customs and Border Protection (CBP) data and is subject to later revision by CBP. The revised data can be seen in Descartes Datamyne.
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