Shipments to U.S. Ports Soar on Rising Retail Demand, Trade Worries

Date: Wednesday, June 27, 2018
Source: Wall Street Journal

The increase in consumer spending and growing concern among manufacturers and retailers over changes to U.S. trade policy are leading to a surge in cargo volume at U.S. seaports.

In the first half of the year, retail imports shipped to major U.S. ports are expected to reach 10.2 million 20-foot equivalent units, a standard measure for container cargo—an increase of 3.8% over the same period last year, according to the National Retail Federation.

Strong economic growth is pushing more goods through supply chains, straining U.S. logistics providers from truck fleets to warehousing operations. Volume also is surging as companies, anticipating the coming changes to U.S. trade policy, have ramped up orders for parts and products from their overseas manufacturers to reduce the financial impact of new tariffs.

“In the face of uncertainty, people are building up inventories,” said Lora Cecere, an analyst with research firm Supply Chain Insights. “I don’t know in the last two decades when we’ve had this level of nervousness in the supply chain.”

In the first five months of the year, goods from China accounted for 46% of all container imports to the U.S., according to shipping analyst Alphaliner. Last week, the Trump administration announced tariffs of 25% on $50 billion of Chinese goods, following up with a threat this week of import levies on an additional $200 billion in goods from China.

At the nation’s main port of entry for goods from Asia, the neighboring ports of Los Angeles and Long Beach, Calif., container imports rose 2.3% year over year in May to 766,643 TEUs. Exports were up 7.9% to 311,093 TEUs as the ports handled their highest monthly volume of loaded containers since last November—the height of the annual peak in shipping. Through May of this year, imports at the Southern California ports were up 4.6% compared with the same period last year.

Ms. Cecere said port infrastructure concerns are also adding to the uncertainty among shippers. Higher cargo volumes are arriving on larger ships that take longer to unload, straining the capacity of nearby roadways and freight-rail networks in need of modernization. “It’s an unprecedented level of craziness,” she said.

The monthly Global Port Tracker report, released earlier this month by the National Retail Federation and Hackett Associates, projected that imports would continue at a record-setting pace through the summer and fall months.

The higher volume of cargo moving through U.S. logistics networks also requires more workers to handle those goods—another area where U.S. businesses are struggling, with the unemployment rate at historic lows.

Joe Carlier, senior vice president of global sales at Penske Logistics, said unemployment rates in Southern California and other major markets have reached as low as 3.5%, and new warehousing operations—bolstered by the explosive growth of e-commerce—are having a hard time staffing up.

“Unfortunately, that really translates into costs for our customers—increased rates on the transportation side and increased wages for our associates,” Mr. Carlier said. “Everything that can happen is converging right now.”

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