Port Tracker calls for 8 percent gain in January

An 8 percent annual increase is expected at major United States-based retail container ports in January, according to the most recent edition of the Port Tracker report by the National Retail Federation (NRF) and Hackett Associates.

In November, the most recent month for which data is available, U.S. ports handled 1.23 million Twenty-foot Equivalent Units (TEU). November marks the 12th straight month to show an annual gain after a 28-month stretch of declines that ended in December 2009. But it was down compared to October’s 1.34 million TEU, due to holiday season stocking by retailers was largely complete, according to the report. November was up 13 percent compared to a difficult 2009.

The ports surveyed in the report include: Los Angeles/Long Beach, Oakland, Tacoma, Seattle, New York/New Jersey, Hampton Roads, Charleston, and Savannah.

As LM has reported, what is happening with these volumes is different from a typical year in which October is typically the peak month for import cargo volumes as shippers move cargo into the U.S. via ocean carriers in advance of the holiday rush. But what is happening now, according to the report, is that the peak month for volumes is being bumped up to earlier in the year.

The shift in the peak month from October to August is due to a backlog in cargo from earlier in 2010 when ocean carriers took their time to replace vessels taken out of service during the recession, coupled with retailers bringing merchandise into the U.S. ahead of time to avoid the potential of delays in the fall.

“Retail sales remain fairly good, and volumes are holding up as the volume drop-off is not as steep as one would expect for this time of year,” said Ben Hackett, founder of Hackett Associates, in a recent interview. “Our forecast appears to be in line with what is currently happening, with typical seasonality suggesting a lower set of numbers.”
Even with the report’s encouraging data, there are still myriad factors that have the potential to negatively impact retail container import volumes, the most notable being high unemployment.

And with a seasonal downturn expected over January through March in particular, which typically results in lower volumes, Hackett said a surge in volumes near the end of January is likely due to the Chinese New Year, along with another surge during the second half of March, when production ramps up again in China.

“Assuming retail sales stay healthy, we should see a return to growth along the normal seasonal patterns,” said Hackett.

Hackett also said that as volumes increase in 2011, retailers may see higher costs from “slow steaming,” (a method used by ocean carriers to preserve fuel), which can increase transit times and have what he described as a direct impact on the time cost of goods.

Slow steaming practices, which many carriers have instituted in the last year, have increased supply chain costs for shippers through higher inventory and transportation costs, according to Hackett.

Carriers are not reducing capacity anymore even with lower volumes, And Hackett said that the implication of this from a shipper point of view is better freight rates.

The report said that the first half of 2010 came in at 6.9 million TEU for a 17 percent year-over-year gain, with the full year expected to hit a revised 14.8 million TEU for a 17 percent improvement from 2009’s 12.7 million TEU, the slowest year since 2003’s 12.5 million TEU. 2008 hit 15.2 million TEU, and the peak in 2007 was 16.5 million TEU.

The Port Tracker report is calling for December to come in at 1.16 million TEU for a 7 percent annual gain. January is projected to also reach 1.16 million TEU for an 8 percent annual increase, and February is pegged at 1.14 million TEU for a 13 percent gain over 2009. March is expected to hit 1.18 million TEU for a 9 percent increase, and April at 1.21 million TEU for a 7 percent gain. May is expected to be down 2 percent at 1.24 million TEU.

“While the economy clearly began to recover in 2010 and drove up cargo volume as retail sales improved, maintaining that momentum in 2011 could be difficult,” said NRF Vice President for Supply Chain and Customs Policy Jonathan Gold in a statement. “Consumers faced with continued high unemployment are expected to focus more on necessities than discretionary spending. Retailers will continue to carefully gauge consumer demand and adjust import levels accordingly.”