2014 volumes expected to be up annually, even with West Coast port labor issues, says Port Tracker

While congestion still reigns at United States-based West Coast ports due to a variety of factors, import volumes are still showing decent growth, according to the most recent edition of the Port Tracker report from the National Retail Federation (NRF) and Hackett Associates.

A notable cause for the West Coast port congestion is the ongoing labor dispute between the Pacific Maritime Association and the International Longshore and Warehouse Union, dating back to the middle of 2014. The parties this week agreed to negotiate with a federal mediator, with the goal of coming to terms on a new contract. 

“Now that a federal mediator is on the scene, we hope the mediator will be able to help the parties quickly reach a new contract so we can begin to work on solutions to the ongoing congestion issues,” NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said in a statement. “The urgent need to end the uncertainty we’ve seen for half a year now isn’t over just because the holiday season has ended. Retailers are already starting to bring in products for the spring season, and want both labor and management to work together to bring these issues to an end.”

In early November, the NRF and more than 100 other organizations penned a letter to President Obama, expressing their concern about the ongoing interruptions at West Coast port terminal operations and asking for help to ensure the situation does not escalate to a complete shutdown of West Coast ports. The labor contract between the parties expired on July 1 and relations have grown more acrimonious as time has gone on, heightening the need for mediation.

The ports surveyed in the report include: Los Angeles/Long Beach, Oakland, Tacoma, Seattle, Houston, New York/New Jersey, Hampton Roads, Charleston, and Savannah, Miami, and Fort Lauderdale, Fla.-based Port Everglades. Authors of the report explained that cargo import numbers do not correlate directly with retail sales or employment because they count only the number of cargo containers brought into the country, not the value of the merchandise inside them, adding that the amount of merchandise imported provides a rough barometer of retailers’ expectations.

The Port Tracker report said that for November, the most recent month for which data is available, hit 1.39 million TEU (Twenty-Foot Equivalent Units, which was down 10.7 percent from October, with the holiday rush easing, and up 3.5 percent compared to November 2013. 

The report estimated December volumes to come in at 1.35 million TEU (Twenty-Foot Equivalent Units), which would be up 2.7 percent annually. According to Port Tracker’s preliminary data, 2014 import volume will be up 6 percent annually compared to 2013’s 16.2 million TEU at 17.2 million TEU

January is pegged at 1.39 million for a 1.1 percent annual increase. February and March are each estimated to hit 1.3 million TEU, respectively, with April at 1.43 million TEU for a flat gain and May up 0.6 percent at 1.49 million TEU.

Total 2014 volumes are projected to reach 17.2 million TEU for a 6.2 percent annual increase, while the first half of the year was up 7 percent annually at 8.3 million TEU.
In October, the NRF said it expects 2014 holiday retail sales (for the months of November and December) to increase 4.1 percent, with all of 2014 to be up 3.6 percent.

Even with what appears to be solid annual growth, coupled with decent economic indicators, including healthy fourth quarter GDP, improving jobs numbers, and low energy prices, Hackett Associates Founder Ben Hackett wrote in the report that despite the spate of good economic news over the last nine months, his firm’s economic model is sensing “change is in the air,” projecting minimal to no growth in 2015, due in part to geopolitical conflicts, lack of demand in Europe, which he explained is driven by ill-advised austerity policies, and slowing industrial activity in China, which has led to the net effect of a drop in demand for global oil.

Port Tracker expects the first half of 2015 to see flat to mild growth at 0.5 percent on the West Coast and 2.3 percent on the East Coast compared to the first half of 2014.

“2014 looks like it has turned out relatively well, even with the West Coast port labor hurdles,” Hackett told LM. “That situation led to some increased activity at East Coast ports and via the Suez Canal, with those ports getting increased cargo share albeit not a dramatic gain. Hopefully, the labor resolution gets resolved and any delays or congestion issues are now purely due to labor and are not operational issues anymore.”

The expected weakness in the first half of 2015 is due to uncertainty, explained Hackett, with unemployment still heading down and industrial production up, the uncertainty remains intact due to things like crude oil prices and whether or not another recession could be coming, which could lead to hesitancy in the first few months of 2015.

When asked if shippers have lost faith in West Coast ports, due to the ongoing squabble between the PMA and ILWU, Hackett said that some shippers are likely to continue using West Coast ports, with some leveraging East Coast all-water routes, and importers, he said, are likely to play things safe by using both East and West coast ports.