 US import front-loading adds to bullish trans-Pacific Q2 outlook |
Source |
American Shipper |
Post Date |
04/02/2021 |
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North American importers are ning to front-load shipments that would normally be sent in the late summer and early fall, solidifying an already bullish outlook for trans-Pacific trade in the second quarter.
US retailers lost sales last year when consumer demand exploded faster than their ability to restock shelves, sing freight rates skyward and carrier on-time performance to near-record lows. As a result, some retailers are shipping their back-to-school and holiday-season merchandise earlier this year, which, coupled with shipments held over from the first quarter due to vessel delays and port congestion, would make the traditional early summer lull not much of a lull at all.
¡°They¡¯re doing it already. They¡¯re shipping early,¡± a container carrier utive who asked not to be identified told JOC.com.
Seeming unrelenting North American demand for Asian goods, further fueled by the $1.9 trillion US federal stimulus package and coupled with nearly maxed-out equipment availability, point to another quarter of near-record import volumes, freight rates, and logistics constraints, according to forwarders, shippers, and carriers.
Industry sources also indicated that the equipment shortages that have slowed container circulation and contributed to congested ports in Asia as well as North America could last past the first half and possibly through the traditional peak season.
¡°There is no room. There is no equipment,¡± a carrier utive who asked not to be identified told JOC.com Wednesday. Continued strong consumer demand will increase competition among retailers and other importers for vessel space and equipment at Asian load ports, and should sustain upward pressure on freight rates, the carrier utive said.
The logistics director at a national retailer who asked not to be identified told JOC.com Wednesday consumer demand is strong and the retailer was moving quickly in service contract negotiations to lock in space for the coming quarter and beyond, in part because it is expecting ¡°pretty solid double-digit¡± percentage growth in volumes, he said.
In conversations with JOC.com, five non-vessel-operating common carriers (NVOs), two industry consultants, and two national retailers said import volumes in the second quarter will remain at or above current levels for at least the next month, soften a bit in May-June, and then increase again as the peak season approaches.
¡°Right now it¡¯s pretty vibrant. I¡¯m not really seeing any fall down in what clients anticipate shipping,¡± said Kevin Krause, director of international product at RIM Logistics.
From July 2020 through February, total US imports from Asia rose 17.5 percent to just shy of 12.6 million TEU compared with the same eight-month period a year prior, including a 27.3 percent year-over-year jump in February, according to PIERS, a JOC.com sister product within IHS Markit. And US retailers are projecting double-digit year-over-year growth in US imports each month through June, according to Global Port Tracker, which is published by the National Retail Federation and Hackett Associates.
Furniture imports ¡®bursting at the seams¡¯
Krause said there is some shifting in the product mix. The past year¡¯s focus on priority medical supplies is lessening, for example, but imports of furniture and appliances are already picking up and should remain strong into the summer, he said.
¡°Furniture is bursting at the seams,¡± said David Bennett, chief commercial officer at the NVO Farrow. With demand for furniture already strong, and dozens of vessels sitting at anchor outside the ports of Los Angeles and Long Beach, importers are building in longer lead times of 12 to 16 weeks to ensure they receive their shipments in time to meet the delivery date, Bennett said.
The logistics manager at a home improvement retailer said demand for all types of furniture is strong right now, but especially outdoor furniture, which has a narrower delivery window than indoor furniture. The retailer has built longer lead times into its transportation plan to ensure that outdoor furniture that is needed in June doesn¡¯t arrive in September, he said.
Vessel delays in Los Angeles-Long Beach are pushing cargo that should enter the US in the first quarter into the second quarter, according to an NVO who asked not to be identified. Shipments of furniture, carpets, light bulbs, televisions, kitchenware, and other general merchandise cargoes are not falling off at all.
¡°We don¡¯t see any let up for now. We have so much freight booked that won¡¯t make it in by the of the month that we¡¯ll have to roll it to next month,¡± he said.
Although forwarders generally do not have firm insight into bookings more than two or three weeks out, Jon Monroe, who serves as an advisor to NVOs, said clients are expecting strong bookings in the coming two months.
¡°I am talking to a number of people who say it will be a ¡®bang-up¡¯ second quarter,¡± Monroe said. One client told Monroe it will be a ¡°great year¡± for appliances of all types.
With COVID-19 pandemic stimulus checks already starting to be deposited into US consumers¡¯ bank accounts, the import demand seen in the first quarter is expected to bleed into the second quarter. Sping on consumer goods is likely to remain strong at least until summer, when consumers may shifting some of their sping to travel and entertainment, especially after they get vaccinated, the NVOs said.
An industry consultant who formerly managed logistics for national retailers said import volumes could soften a bit in June and July as families return to traveling for summer vacations, but demand for goods should pick up strongly in August at the ning of the peak holiday-shipping season.
Import demand causing port congestion
Hapag-Lloyd CEO Rolf Habben Jansen said demand has remained strong in the weeks after Lunar New Year, and the carrier¡¯s booking levels indicated this would continue through the second quarter, keeping pressure on the Los Angeles¨CLong Beach port complex to clear the vessel backlogs that at times over the last three months reached as high as 32 ships waiting at anchor.
¡°The US situation at LA-Long Beach will take time to resolve,¡± he told reporters in a briefing this week. ¡°Dwell times are really high and it takes a long time to get boxes out, and I don¡¯t think the congestion will go away very soon. It will take a couple of months before it all settles down, and I hope we will be back to a bit more normal situation towards the of Q2 or latest early Q3, because then the peak season will be about to start.¡±
Backlogs in Los Angeles-Long Beach had been consistently in the range of 28 to 32 container vessels at anchor since late 2020, but over the past week, the number of box ships at anchor ped to 19, according to the Marine Exchange of Southern California. However, on Wednesday, the number of container vessels at anchor shot back up to 26, according to the exchange.
There is concern in the importing community that if cargo volumes continue to increase beyond the second quarter and into the peak season, terminal operators in Los Angeles-Long Beach may not have time to clear the existing backlog.
¡°Honestly, when business gets better, [the congestion] is going to get worse. It¡¯s not just the shock to the tem; what we¡¯re seeing now is a mini version of what will happen when the economy picks up,¡± said Andy Rosener, an industry consultant and former logistics manager at an importer.
¡°I really do think the floodgates are going to up for the retailers, and this isn¡¯t going to get any better. If anything, it¡¯s going to get worse, much worse,¡± Rosener said.
Monroe said that after months of congestion in Los Angeles-Long Beach, some clients have looked for relief by shipping through the Pacific Northwest, or via all-water services to the East Coast. As a result, PNW services are full, East Coast services are close to full, and space pressures on Pacific Southwest services are actually easing a bit, although that doesn¡¯t mean fewer ships will be calling in Southern California, he said.
Monroe noted in his weekly newsletter to clients on Wednesday that additional vessel calls initiated by carriers are arriving now in the Pacific Northwest, and new weekly services that were recently announced will be starting soon.
Monroe said The Alliance has an extra loader scheduled this week and next week and HMM will have an extra loader next week to the Northwest Seaport Alliance of Seattle and Tacoma, which has a total of four ad-hoc calls scheduled for the next four weeks. The first Zim expedited service is scheduled to arrive this week and SM Lines will have an extra loader in late March. T-18 in Seattle will have the first call of Wan Hai¡¯s new Taiwan China service in early April, he said.
However, as carriers seek relief from congestion in Los Angeles-Long Beach through new services to Oakland and the Northwest Seaport Alliance of Seattle and Tacoma, and heavy import volumes in Vancouver and Prince Rupert in Canada, they run the risk of shifting the congestion problems to the northern ports, NVOs warn.
In a March 12 client advisory concerning port conditions across North America, Maersk cited average vessel wait times of seven to 15 days in Los Angeles-Long Beach, eight to 12 days in Oakland, five days in Vancouver, and six days in Prince Rupert. Maersk listed the average vessel wait time in Savannah as 84 to 132 hours. In Seattle, though, the average wait time was only one day, according to the Maersk advisory.
Demand for vessel ters increases
The behavior of container carriers indicates they are relatively confident demand will remain strong in the longer term, with most major carriers willing to sign 10-year ter deals, maritime industry analyst Alphaliner wrote in its latest weekly newsletter.
This was also the view of consultancy AlixPartners, which wrote in a report released in mid-March that favorable conditions for global carriers could persist over the longer term if the strong, demand-driven recovery materializes as more of the population is vaccinated and the pandemic fades. But shipping lines will need to continue to closely manage supply if they want to maintain the exceptional profitability they enjoyed in 2020, the consultant warned.
AlixPartners also had some advice for shippers. ¡°Shippers have to adapt to a new normal of shipping rates that are higher than those that have prevailed through most of this century ¡ª though not as high as they stand today,¡± the consultant noted.
¡°Successful adaptation requires shippers to actively deal with the key drivers of transportation costs: urgency, dimensions, lead time, and distance. By improving container use, by exting delivery times to some customers, by stretching lead times for carrier bookings, and by reducing shipping distances, shippers can miti
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