Port Tracker report calls for even first half annual volumes despite overcapacity and rate pressure

Despite atypical annual volume comparisons for the first half of 2016, the monthly Port Tracker Report issued today by the National Retail Federation (NRF) and maritime consultancy Hackett Associates is calling for first half 2016 volumes to be basically even on an annual basis. 

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.

“Comparisons are still complicated because of last year’s situation at the West Coast ports but should clear up in the second half of the year,” NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said in a statement. “Year-over-year numbers are skewed but on a monthly basis imports are building normally as the back-to-school season approaches.”

For January, the most recent month for which data is available, total volume was 1.5 million Twenty-Foot Equivalent Units (TEU), which was up 4.4 percent compared to December and up 21.5 percent compared to January 2015, which saw unusually low volumes leading up to the signing of a new labor contract between the Pacific Maritime Association and the International Longshore and Warehouse Union.

Annual volume estimates for the first two months of the first quarter are pointed higher than what is considered typical, due to low volumes caused for the same period a year ago, which was just prior to when a new West Coast port labor agreement was reached. As previously reported, the combination of West Coast port labor issues, which led to congestion, hindered port production and throughput from late 2014 into the first quarter of 2015 are expected to result in atypically high annual comparisons before returning to a more normalized rate in April, according to Port Tracker.

February was estimated at 1.4 million TEU for an 17.3 percent annual increase, and March is at 1.35 million TEU for a 22.2 percent annual increase, with both projections seeing the annual variations brought on by last year’s labor-related events on the West Coast. April represents a more typical month, with the report calling for volumes to be down 1.8 percent at 1.49 million TEU. May and June are pegged at 1.56 million TEU (for a 3.4 percent decrease) and 1.54 million TEU (for a 1.6 percent decrease), respectively. July is expected to be down 0.4 percent at 1.61 million TEU. The first half of 2016 is expected to hit 8.8 million TEU for a 0.2 percent annual decrease.

Hackett Associates Founder Ben Hackett blasted recent moves by some large container shipping carriers to add capacity at a time when freight rates are declining and not sticking with shippers.

“As freight rates on the Asia-Europe route continue to decline to levels of near absurdity in the face of too little demand and too much capacity, CMA CGM Group has announced it will bring six 18,000-TEU ships into service on the Transpacific route from Asia to the U.S. West Coast,” Hackett wrote in the report. “These ships equate to half a string on the Asia-Europe route, so we will need to see which other member of the Ocean Three Alliance will shift its vessels as well. Does it make sense? Absolutely not. It flies in the face of financial and economic wisdom and totally ignores the state of the freight market on the dominant eastbound leg from Asia to North America.”

Hackett added that as per estimates in the report, Asia to North America volumes are expected to decline in 2016, with freight rates expected to fall steeply from a monthly average of $884 per forty-foot equivalent due to the introduction of new capacity. And he explained that this situation leads to carrier either having to lay up ships or shifting to another route, which he called a choice between two evils.