Port Tracker reports solid volumes even though West Coast port labor situation remains muddled

On the heels of record-breaking volumes in September and October, the most recent edition of the Port Tracker report from the National Retail Federation (NRF) and maritime consultancy Hackett Associates expects import cargo volumes at United States-based retail container ports to slow down in November. The increased volumes in September and October were largely due to retailers pulling inventory forward in advance of a possible West Coast ports labor strike, which is a situation that still remains in flux.

As previously reported, the heavy September and October volumes were spurred on by various factors, including: a combination of increasing congestion at ports, the lack of a new labor contract between the Pacific Maritime Association and the International Longshore and Warehouse Union (ILWU) impacting West Coast port operations, and improving consumer confidence aligned and subsequently resulted in strong volumes as retailers endeavored to make sure they were prepared inventory-wise for the holiday shopping season.

“Retailers have done all they can to stock their shelves and build up inventories in case the worst should happen,” NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said. “We believe it’s time for President Obama to send in a federal mediator and do what it takes to reach an agreement that will work to the benefit of not just labor and management but all the businesses and consumers who depend on these ports.”

Last week, the NRF and more than 100 other organizations penned a letter to President Obama yesterday, expressing their concern about the ongoing interruptions at West Coast port terminal operations and asking for help to ensure the situation does not escalate to a complete shutdown of West Coast ports.

“While the parties to the negotiation stated earlier this year that they would continue operations throughout the negotiations, we have seen crisis levels of congestion at the ports since September,” the letter stated. “The sudden change in tone is alarming and suggests that a full shutdown of every West Coast port may be imminent. The impact this would have on jobs, down-stream consumers, and the business operations of exporters, importers, retailers, transportation providers, manufacturers and other stakeholders would be catastrophic.”

The ports surveyed in the report include: Los Angeles/Long Beach, Oakland, Tacoma, Seattle, Houston, New York/New Jersey, Hampton Roads, Charleston, and Savannah, Miami, and Fort Lauderdale, Fla.-based Port Everglades. Authors of the report explained that cargo import numbers do not correlate directly with retail sales or employment because they count only the number of cargo containers brought into the country, not the value of the merchandise inside them, adding that the amount of merchandise imported provides a rough barometer of retailers’ expectations.

In September, the most recent month for which data is available, the report said that the surveyed ports handled 1.59 million TEU (Twenty-Foot Equivalent Units), which represents a 5.2 percent increase over August and a 10.9 percent annual gain over September 2013. October is estimated to hit 1.59 million TEU and is within 3,000 containers of September, the report said, for an 11 percent annual increase. November is forecasted to reach 1.4 million TEU for a 3.9 percent annual hike, and December is expected to be up 3.3 percent at 1.36 million TEU.

Should these numbers hold, the report said that total 2014 volumes would reach 17.4 million TEU, up from last month’s 17.1 million TEU forecast, and would signal a 6.4 percent annual increase over 2013’s 16.2 million TEU. Port Tracker said that the first half of this year was up 7 percent over the first half of last year at 8.3 million TEU.

The NRF recently stated that it expects holiday sales, for the months of November and December, to be up 4.1 percent this year at $616.9 billion and up 3.6 percent for all of 2014.

Hackett Associates Founder Ben Hackett wrote in the report that, surprisingly, “there has been a marked peak season on the West Coast despite all the obstacles to the free flow of goods that have been in the way,” adding that “perhaps it was in anticipation of the consequences of the obstacles that brought so much cargo forward.”

As for September volumes, Hackett described them as a bumper crop that exceeded expectations, adding that the current pace of U.S. economic growth is not being “halted” by operational and labor issues, citing how West Coast ports are expected to be up 4.9 percent for all of 2014, and third quarter GDP growth at an annualized rate of 3.6 percent, leveling off of the inventory-to-sales ration, which lessened concerns over an inventory build up, and consumer confidence up over 2013 levels.

Even with these positive indicators, the situation at West Coast ports remains troublesome, with Hackett explaining that the congestion is costing carriers, terminal operators, and importers money in their efforts to clear cargo for inland delivery. He added that these issues largely stem from a lack of equipment, lower productivity, lack of on-dock rail and trucks, with more drivers electing to not waste their time waiting in delays and seeking other employment. Hackett also said that the current predicament in a sense mirrors what happened in 2004, when larger ships in larger alliances came online and caused congestion.

Charles W. “Chuck” Clowdis, Jr,, managing director, IHS Economics, Global Trade & Transportation, recently told LM that while Los Angeles and Long Beach ports have seen worse congestion in previous years this’ season’s malaise and slowness of processing container ships is alarming since it comes on the most promising Holiday Season since 2005-2006.

“Some receivers are diverting to other ports but most are too late and subject to steamship line schedules,” he said. “We spoke with one major retailer who has dusted-off his Holiday ‘air cargo critical’ list and is lining-up space now. While on select goods only at this stage, port congestion can put more and more Holiday Gift items in the air before they are on-the-shelves.”