Strong consumer demand produced record import volume in August, and near-record imports are projected for October, which will close out a busy peak-shipping season, according to the National Retail Federation.
However, industry analysts emphasize that beneficial cargo owners can anticipate a soft rate environment during the post-holiday shipping slump in November-December, and into the service-contracting season in the eastbound Pacific next spring, because of lingering overcapacity.
US containerized imports in August increased 1.4 percent over July and 5.6 percent compared to August 2016, setting a new monthly record, according to the Global Port Tracker published monthly by the NRF and Hackett Associates. When September’s numbers are in, the publication anticipates an increase of 3.7 percent compared to September 2016. October’s imports are projected to be up 2.8 percent from October 2016 and, while somewhat lower than the August number, October imports will be one of the highest in the past 17 years.
The NRF said strong consumer demand will result in calendar year 2017 retail sales increasing between 3.2 and 3.8 percent over 2016. Holiday sales this season will be 3.6 and 4 percent higher than last year. “Consumers are buying more, and everybody from dockworkers to truck drivers is trying to keep up. We hope this is a sign of a strong holiday season for retailers, shoppers and our nation’s economy,” said Jonathan Gold, NRF’s vice president for supply chain and customs policy.
Despite record import volumes, spot rates from China to the US during the July-October peak-shipping season have actually gone down. “The Shanghai Containerized Freight Index has fallen by 20 percent since the end of June, and is now in line with last year’s levels,” reflecting gross capacity growth, according to a Sept. 29 analysis of the financial performance of Maersk Line, the world’s largest container line, by Jeffries.
Jeffries said the outlook for the liner industry in the fourth quarter is “relatively uncertain.” Global growth in the container shipping industry’s capacity in the fourth quarter will be 4 percent,while demand will diminish somewhat in November and December in the normal post-holiday lull. Imports from Asia will come under further pressure because China is expected to continue closing dozens of factories in order to reduce air pollution.
On the other hand, US imports from Asia for the rest of the year will be about what is expected as the peak season winds down, said Eytan Buchman, vice president of marketing at Freightos. “Based on demand we’re seeing on the Freightos Marketplace, we do anticipate that shipping volumes will stay fairly consistent, preventing rates from dropping too much further,” he said.
Global Port Tracker projects that US containerized imports in November will drop 1.7 percent year-over-year but December’s imports will be up 1.3 percent.
The freight rate outlook early next year when carriers and their customers hold service contract negotiations in the March-May contracting period in the eastbound Pacific should be less chaotic than it was this past spring. Carriers and BCOs were in the throes of the April 1 global restructuring of the vessel-sharing alliances, which were reduced from four smaller alliances to three larger ones. “Unlike contract negotiations in 2016, new alliance formation, carrier consolidation and lessons learned from the second half of 2016 may help carriers bolster rates,” Buchman said.
Continued growth in global capacity, though, could limit carriers’ ability to negotiate significantly higher service contract rates in the eastbound Pacific next spring. Jeffries noted that capacity in the fourth quarter will increase 2.2 percent, with additional vessel deliveries scheduled for early 2018. Supply and demand balance will therefore be affected largely by how much capacity carriers idle during the slack winter months. Jeffries cited an Alphaliner report that stated idle capacity should increase from 1.7 percent today to 6 to 7 percent in January, if carriers hope to match underlying demand growth of 4 percent in the first half of 2018.
US import volumes in January and February will be compared to the 2017 Chinese New Year, which was earlier than usual. That resulted in strong import growth in January ahead of the closing of factories in Asia for the celebrations, and then a drop in imports in February when factories were closed for part of the month. With a later lunar New Year in 2018, Global Port Tracker projects that imports in January will decline by 2 percent compared to January 2017, while February imports will increase 10 percent year over year.