Ocean shipping: Port Tracker report says volumes may be inching back up

Retail container traffic levels could see year-over-year growth by end of October

Jeff Berman, Group News Editor -- Logistics Management, 6/9/2008

WASHINGTON—Although ongoing economic issues are slowing down traffic at U.S.-based retail container ports, monthly growth is still occurring, with ports possibly returning to year-over-year growth by the end of October, 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, and Houston—handled 1.26 million TEU (Twenty-foot equivalent units) in April, the most recent month for which numbers are available. This monthly performance is 8.9 percent better than March’s 1.16 million TEU, which was the lowest volume recorded since February 2006’s 1.1 million. Despite the month-to-month gain, April was down from April 2007 by 4.9 percent.

In order for U.S.-based container ports to sustain monthly growth and return to year-over-year growth patterns by the end of October, various things need to occur to ensure that is the case, with consumer spending at the top of the list, according to Paul Bingham, Global Insight analyst and Port Tracker author. The reports calls for October volumes to come in at 1.48 million TEU, representing a 2.7 percent yearly increase and what would be the first year-to-year increase since July 2007—at 1.44 million TEU compared to 1.4 million in July 2006.

“Consumers will have to at least maintain their current, weak pace of retail spending, and not be forced to divert too much more of their income to just paying for gasoline and diesel fuel,” Bingham told LM. “The economic stimulus checks have had some impact on retail sales but less than originally expected due to the spiking fuel prices and marked decline in overall consumer sentiment.”

Another factor at play according to Bingham is that overall inflation is up due to the higher increases in oil and food prices, thus reducing the purchasing power of consumers, especially for imports other than petroleum. And as retailers are closely managing inventories to not get caught with unsold goods if demand should fall further, he explained that predicted import volumes still depend on consumers spending more in the second half of the year than in the first two quarters of the year.

While the Port Tracker report is calling for year-to-year growth at the end of October, Bingham warned that this should not be viewed as a sign of things to come.

“We believe that the October volume will be the peak for the year, where the peak is a reflection of seasonal holiday sales, not a reflection of a substantially improved economy at the end of the year,” said Bingham. “We are not forecasting recovery to gain traction in the economy until mid-2009 now, despite a small rebound from now through the third quarter due to the fiscal stimulus from the government.  Unfortunately, much of the originally expected increases in retail sales from that fiscal stimulus program are now going to go towards gasoline, given the sharp run-up in oil prices.”

In the coming months, the Port Tracker report expects May’s volume at 1.3 million TEU, down 5.7 percent from May 2007. Other projections include: June at 1.34 million TEU, down 8.1 percent from June 2007; July at 1.4 million TEU, down 2.8 percent from July 2007; August at 1.46 million TEU, down 0.3 percent from August 2007; September at 1.43 million TEU, down 3.1 percent from September 2007; and October at 1.48 million TEU, up 2.7 percent from October 2007.

Given the current economic situation, due in large part to high energy prices, low consumer spending, and the declining dollar, among other factors, Bingham said that the current market environment is similar to last month from the perspective of an import shipper. He explained that capacity should be adequate, despite service rationalization steps by the carriers, though bunker fuel adjustment factors / fuel price adjustment surcharges continue to climb, making total transportation costs higher, even if the carriers are getting higher base rates. 

“Export shippers face tight capacity as exports boom and carriers are not (yet) adding capacity to service exports that are still thought of as a backhaul leg within composition of vessel services,” said Bingham. “Performance of the system should remain adequate.”