Ocean shipping: Port Tracker report says December retail container port volumes snaps four-month decline

Jeff Berman, Senior Editor -- Logistics Management, 1/9/2008

WASHINGTON—After four consecutive months of declines, it appears that traffic at United States-based retail container ports is trending up based on December’s performance, according to the monthly Port Tracker Report by the National Retail Federation, a retail trade association, and Global Insight, a provider of economic and financial information.

The ports surveyed in the report—including Los Angeles/Long Beach, Oakland, Tacoma, Seattle, New York/New Jersey, Hampton Roads, Charleston, and Savannah—handled a cumulative1.38 million TEU (Twenty-foot equivalents) in November, the most recent month for which actual numbers are available. November’s tally trails October’s 1.44 million TEU performance, and it is off 2.2 percent from November 2006.

Despite four straight months of slumping traffic, due in large part to myriad global and domestic economic indicators—most notably a significant lack of peak season activity—the Port Tracker report said that December’s volume is estimated at 1.35 million TEU, which is 3.3 percent higher than December 2006. The report also explained that while this total is down from November, it represents the first time since July that a monthly volume had a year-over-year increase.

In an interview with Logistics Management, Global Insight Analyst and Port Tracker Author Paul Bingham said that the difference in December volume year-over-year was small and may be accounted for just by the quirk that there was a longer post-Thanksgiving shopping season in 2007 than in 2006 for last-minute imports and for post-Christmas sales and gift card redemptions.

“Our estimate that the four-month run of lower year-over-year monthly volume could also be signaling a trough or plateau in the further weakening of the economy and associated import demand,” said Bingham.

National Retail Federation Vice President for Supply Chain and Customs Policy Jonathan Gold said in the report that December’s performance reflects retailers carefully managing inventories during the holiday shipping season.

But Bingham said “these year-to-year increases are small and reflect that the economy is not yet in recession, so there is growth, albeit weak, in demand.”

And he explained another factor that will begin to affect the first half of 2008 is inventory-building by some importers who will incur the extra cost as insurance against any possible disruptions as a result of the West Coast International Longshore and Warehouse Union (ILWU) labor negotiations.

“We can not confirm that this is yet having any impact this early in the year, but as we get closer to the June contract expiration date, some shippers may hedge some inventory to reduce the risk of exposure if there were a port disruption,” said Bingham. “We are not projecting that there will be any port disruption as a result of these labor negotiations but it is understandable why some importers may take steps anyway to minimize risk, given that there was the lock-out on the West Coast during the last contract negotiations in 2002.”

Going forward, Bingham said there will be weakness in first quarter import container traffic volumes for the next few months, as the economy is not going to turn around during the first half of the year.

In December, Bingham told LM that “import shipping volume growth will not rebound until the U.S. economy does, because this is a downturn in the economy led by reductions in consumer and business spending which has caused the slow down in import volumes. And coupled with ongoing economic challenges like oil prices rising, a weak job market, the credit crunch and home mortgage crisis, there will be significant fallout for shippers and carriers when moving freight.

“With weak import demand growth, the challenge will not be adequacy of capacity or system performance, but challenges for shippers and carriers from weak revenues for both groups as well as higher energy prices to ship the freight moving,” said Bingham.

In the next few months, monthly container traffic will be up and down, according to the Port Tracker report. January’s volume is expected to hit 1.31 million TEU, which is up 1.8 percent from January 2007. February—what Port Tracker says is the slowest month of the year—is forecasted to drop 5.5 percent at 1.24 million TEU. Things may improve in March, though, with volumes expected to spike 6.3 percent at 1.35 million TEU. April and May are projected to hit 1.43 million TEU and 1.44 million TEU, which would be up 8.1 percent and 4.4 percent, respectively.