Friday, August 14, 2020

Trans-Pacific shipping: mixed signals

It's hard to make sense of the current state of US trade with the Far East, particularly China.

On the one hand, we know that the COVID-19 pandemic clobbered container shipping some months ago, as we discussed in these pages on more than one occasion.  We also know that importers who would normally have their Christmas orders already on the water, with some already in the USA at warehouses, have been markedly slower about that this year.  GCaptain reports:

Imports at major U.S. container seaports could hit their lowest level in four years as the novel coronavirus pandemic pummels a U.S. economy that was already grappling with negative effects of the U.S.-China trade war, experts said.

Total container imports could fall 9.4% in 2020, according to the National Retail Federation (NRF) and Hackett Associates’ Global Port Tracker report.

. . ., Walmart and other retailers have begun bringing in inventory for the vital winter holiday season. August is forecast to be the busiest month of the peak ocean shipping season that stretches from July to October.

“Retailers are being careful not to import more than they can sell. … This is not the year to be left with warehouses full of unsold merchandise,” NRF Vice President Jonathan Gold said.

. . .

“There are signs of prepping for the year-end holiday season,” Gene Seroka, executive director of the Port of Los Angeles, the No. 1 gateway for sea trade with China, said on Thursday. “The upticks are modest” as some busy retailers restock.”

There's more at the link.

However, from the perspective of trans-Pacific shippers, there's a very different scenario, as Freightwaves reports.

China-U.S. West Coast container rates continue their astonishing climb. Not because of too little vessel supply, but because of too much import demand. U.S. import demand that is not surging despite of coronavirus, but because of it.

“The trans-Pacific eastbound market is going crazy,” exclaimed Nerijus Poskus, vice president and global head of ocean freight at digital freight forwarder Flexport. Current dynamics are unprecedented, he said in an interview with FreightWaves on Wednesday.

“All of us thought that because of the pandemic, consumption would go down,” he said. Instead, it has gone up — at least temporarily.

“Our clients are selling more. They’re selling more online. And that’s why they’re shipping more into the U.S. Of the top 100 clients of Flexport, 80% of them are growing year-on-year and assumedly they’re gaining market share,” reported Poskus.

. . .

Copenhagen-based Sea-Intelligence estimates that carriers have increased their Asia-West Coast third-quarter capacity by 13.1% year-on-year, marking “the strongest capacity growth in a decade.”

“Spot freight rates … have surged to their highest level ever despite the restoration of blank sailings and even the introduction of new capacity,” said Alphaliner.

The Shanghai Containerized Freight Index (SCFI) rate for China-U.S. West Coast was at $3,144 per forty-foot equivalent unit (FEU) last week and $3,167 per FEU the week before, the only two weeks it has ever topped $3,000.

Again, more at the link.

If you put those two reports side-by-side, something's seriously out of whack.  Imports can't be lower than ever by one metric, but higher than ever by another!

I'd love to know what's going on to cause this confusion.  I suspect it has several causes, including a shortage of empty containers going back to China to be refilled, smaller container vessels being sold off and/or scrapped, factories gearing up to start production again in the Far East before US vendors are ready to sell as much as before, and so on.  Clearly, there are a lot of mis-matches somewhere in the system.

If anyone has a better idea what's going on, please share it with us in Comments, as US imports are a key economic metric.  Over 70% of US economic activity revolves around consumer spending.  If consumers have fewer goods available to buy, their spending will necessarily decrease - but the opposite isn't necessarily true;  if more goods are available, their spending might not increase, because they may not have the ready cash available to spend.




Barry Jones said...

And this Morning (08/14/2020) gCaptain reports that the Port of LA is reporting this:
sooooo, now what?

JNorth said...

If I'm reading this right the first one is dealing with mass bulk shipments, aka Walmart want's a whole freighter load of widget-X or Ford want's 200,000 turbo encabulators. The second they are talking about spot rates so not how the big guys pay for stuff, this is more like the BF-F8HP radio I ordered a while back and had to come from China (pretty much every radio does these days). So we have a massive amount of people ordering stuff online going to them individually but people are not going to the stores so the big players shipments are down while the ships still get filled with tons of small orders.

Ratus said...

"Imports can't be lower than ever by one metric, but higher than ever by another!"


2020 would like to talk to your manager about that.


Old NFO said...

Concur with JNorth. It's a 'shift' in the loadouts...

Jonathan H said...

I suspect at least some of it is 'catching up' from orders that weren't made, or weren't shipped, earlier in the year. A significant portion of those orders will delayed instead of cancelled. For example, the Christmas orders that are shipping now, late, instead of being here already.
At the same time, capacity has gone down to an extent because of ship retirements, limited crew, etc, so for a time there will be higher demand than supply, hence the rise in prices.
I'd be interested in finding out if this is happening nationally, or just on the West Coast. Remember that east Coast ports, particularly Savannah and Jacksonville, have been siphoning business from LA/ west coast for years and that siphoning has increased since the Panama Canal increased capacity several years ago.

Well Seasoned Fool said...

Once the containers reach our West Coast, they mainly move by rail, that is to say, the Union Pacific and BNSF. Volume on both are down. Not computer literate enough to find what the Canadian railroads are doing.

Inventive said...

I work in the Import/Export business in the midwest. March was awful, but the rebound has been quite good since then. I won't say normal, because I haven't looked at the exact numbers but from what I've heard from the operations folks it's been a crazy busy summer so far.

Mr. B said...

I am in Indiana. In our state you get one half of your gross wages in unemployment up to $800 week. Therefore, if you grossed $400/per week your unemployment would be $200/per week under regular rules. With the stimulus of an extra $600 per week it works out to $800 per week. The stimulus,in this situation, doubled this person's wages. Is it no wonder the economy did totally tank. But remember Weimar Germany. They didn't foresee hyperinflation, but it happened. (By the way, the stock market of Germany soared into this).