Ocean shipping: Port Tracker report expects slow retail container growth to continue

Jeff Berman, Senior Editor -- Logistics Management, 3/14/2008

WASHINGTON—As has been the case in previous months, growth at United States-based retail container ports is still mirroring the current faltering economic situation, with weak or negative growth predicted in the coming months, 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.

This ongoing economic malaise—triggered by rising energy prices, a slowdown in consumer spending and subsequent poor retail sales, the credit crunch, and the housing glut, among others—is driving for the ongoing situation, which is affecting all facets of the economy, according to industry reports, company CEO’s, and government officials.

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 cumulative 1.24 million TEU (Twenty-foot Equivalent Units) in January, the most recent month for which numbers are available. January’s output was down 3.5 percent from December’s 1.28 million TEU and 4.3 percent compared to January 2007. It also fell short of the 1.28 million TEU predicted in last month’s Port Tracker report. January’s performance marks the sixth consecutive month with a year-over-year decline, according to the report.

With “weak or negative” year-over-year growth predicted to continue, Global Insight Analyst and Port Tracker Author Paul Bingham told LM in an interview that Global Insight is now estimating that the U.S. will be in recession in the first two quarters of 2008, with weak consumer and business spending reflected in weak import volumes through the ports. He added this will have some direct effects on shippers.

“For shippers, this means adequate capacity across the system, even as some providers attempt to reduce the scale of their operations to match the weaker demand,” said Bingham.

Jonathan Gold, NRF Vice President for Supply Chain and Customs Policy, said in a statement that sentiment is likely to hold true as container traffic mirrors what retailers expect to sell in their stores, with retailers managing inventory to match demand and only modest growth expected for retailers in 2008.

And with Global Insight maintaining that the United States will remain in a recession through at least the second quarter, Bingham opined that it is reasonable to expect it will have an impact on how shippers arrange Peak Season planning heading into the middle and second half of this year.

“The market weakness this year will likely permit shippers to delay their shipments until later in the year, as weak volumes won't strain capacity as much as in recent years during the Peak Season,” said Bingham. 

He added that if it were not for the expiration of the ILWU contract in July and the TWIC program implementation date in October, shippers could concentrate on minimizing inventory carrying costs and risk this year, because underlying demand will be soft. 

“With these other external concerns however, caution will still be evident in many shippers' plans this year as they still balance risk minimization against the extra costs of advancing forward the timing of shipments,” said Bingham.

Despite retailers’ lower inventories and a stagnant economy, Bingham said that with better weather ahead and congestion currently minimal, seasonal shipping patterns will be evident into the spring coming out of the slow season, despite the current market weakness. But he cautioned that the rebound out of slow season will be muted by the weakness in demand from the retailers and businesses that are seeing sales declines with the downturn of the economy.

Going forward, the Port Tracker report expects February to be down significantly at 1.18 million TEU—or minus 9.6 percent annual growth. The following months projections, noted the report, include: March at 1.27 million TEU, with no percentage change from 2007; April at 1.35 million TEU, up 1.8 percent; May at 1.37 million TEU, up 0.7 percent; June at 1.4 million TEU, down 3.6 percent; and July at 1.45 million TEU, up 0.2 percent.