2015 Peak Season prospects are mixed

While nearly one-third of LM survey respondents note Peak Season has a significant impact on operations, industry experts say it will not be much to write home about this year

When it comes to assessing how things may be shaping up for the 2015 Peak Season, it stands to reason that looking at what may or may not happen compared a year ago is akin to comparing apples to oranges.

While there are a few similarities to be sure, the one main difference centers around the fact that a year ago at this time labor contract negotiations between the International Longshore & Warehouse Union and the Pacific Maritime Association were still ongoing, which resulted in shippers taking measured steps in the event of a possible West Coast port strike in the form of high amounts of inventory being imported to the U.S. earlier than normal, which seemed like more than a possibility several times during the drawn out, month’s-long negotiating process between the parties. This was a serious matter, considering the fact that the ports of Los Angeles and Long Beach alone handle more than 40 percent of U.S. incoming container traffic through West Coast ports.

While the West Coast port labor situation has since been resolved in the form of a new five-year labor contract inked in May, the calendar continues to move along, with Peak season potentially on the horizon. The operative term here is “potentially,” given the fact that in recent years, as reported by LM, some industry stakeholders maintain that the appearance of a traditional Peak Season has dissipated, due to things like an uneven economy, employment, and sluggish GDP growth among other factors.

At the same time though, there are some encouraging economic indicators at work, too, including strong momentum in automotive and housing markets, manufacturing growth, improving consumer confidence and steady retail sales numbers, a strong U.S. dollar, and still-low gasoline prices.

With all these factors currently at work, data from a Logistics Management reader survey pointed to a mixed outlook for 2015 Peak Season prospects, with 48 percent of the more than 200 respondents, whom are buyers of domestic and global freight transportation and logistics services, indicating they expect things to be more active than last year (down from 68.1 percent in 2014), with 13 percent expecting a less active Peak Season than a year ago. And 39 percent of respondents expect no change from last year.

On a related note, the impact of Peak Season on day-to-day operations was telling, with 32 percent of respondents, or just short of one-third, saying it has a very significant impact, and another 50 percent citing a somewhat significant impact.  Another 17 percent said Peak did not have a very significant impact, with just 1 percent pointing to no material impact.

As for the reasons respondents are calling for increased activity, higher demand and increased e-commerce activity were cited by retail shippers. But on the other end a tool manufacturer not sold on a true 2015 Peak Season explained that last year’s port labor situation inflated activity, which is not the case this year, coupled with an increase in air shipments that he explained is less likely this year.

That sentiment was in accord with feedback from FTR Senior Analyst Larry Gross.

“On the domestic side, it looks like things are going to be relatively muted,” said Gross. “A still high inventory-to-sales ratio does not help, but they are moving up in a secular way in addition to some of the normal gyrations, and as our roadways and infrastructure become less reliable and slower, more inventory is needed.”

While he expects Peak Season to be muted domestically, Gross explained that it “has not been much to write home about” for years, with people only remembering the exception, or busy peak activity, as opposed to the norm, which is quieter. And he also noted that it stands to reason October will again be the most active month of the year, even though March was atypically high, following the tentative ILWU and PMA agreement being inked, which led to increased cargo import activity at West Coast ports as retailers worked off cargo backlogs.

Like FTR’s Gross, Ben Hackett, founder of maritime consultancy Hackett Associates and co-author of the monthly Port Tracker report with the National Retail Federation, also has doubts regarding the 2015 Peak Season. He also pointed to the high inventory-to-sales ratio in recent months, which acts as a hindrance to true import flow in advance of Peak Season.

“Unless inventory moves quickly, it is fair to say there won’t be much of a Peak Season this year,” said Hackett. “This can also lead to ocean vessel voyage cancellations as well.”