Ocean freight import growth to continue at least through the first half of 2021

As 2020 gives way to 2021, ocean freight demand continues to replenish inventories from a busy holiday season, inventory build-up ahead of the Chinese New Year manufacturing closures in February and supply just-in-case inventories as COVID-19 continues around the world.

The Shanghai Containerized Index ended 2020 with the index down $61 to $4,018 per TEU for US West Coast Ports and down $148 to $4729 per TEU for US East Coast Ports. While a slight dip in average spot rates was welcomed news, the likelihood is high that the already steep spot rates will increase at least throughout the first quarter of the new year as containers remain scarce and US import demand remains high.

Indeed, in a Dec. 28 CNBC interview, “It’s all the change in the American consumer,” Port of Los Angeles Executive Director Gene Seroka said. “We’re not buying services, we’re buying goods.” Year-to-date through November, total TEUs at the port are down 2.99%. However, the story is in the imports, up 25.17% so far for the year.

Meanwhile, on the east coast, year-to-date through November, the Georgia Port Authority has reported total TEUs on par with 2019 TEUs while loaded imports are up 1.7%.

The US ocean freight market story seems to be mainly on the West Coast thanks to Asian exports; however, as bottlenecks occur at US ports on the West Coast, the entire inland supply chain has and will continue to struggle with capacity shortages and delays through to the final-mile.

As a result, shifts from West Coast ports to East Coast ports are occurring, according to some publications. Over 60% of the US population resides east of the Mississippi River, which could be beneficial for ocean freight movements by positioning TEUs closer to customers and potentially reducing transportation costs, improving transit times, and speeding up the final mile.

The latest Port Tracker from Hackett Associates and the National Retail Federation (Dec. 9) suggests positive year-over-year monthly increases through April. However, keep in mind that for March and April, year-over-year comparisons are easy positive gains due to the coronavirus pandemic occurring in March. A clearer picture of the US ocean freight market will not emerge until the second half of 2021 or actually in 2022.

The Shanghai Containerized Index ended 2020 with the index down $61 to $4,018 per TEU for US West Coast Ports and down $148 to $4729 per TEU for US East Coast Ports.

Seroka noted in the CNBC interview that Los Angeles’ cargo volume is up 50% in the second half of 2020 compared to the first half of the year. As noted earlier in this article, strong monthly inbound TEUs were due to many reasons, including delays from earlier in the year when Chinese manufacturers were closed due to the Chinese New Year and to COVID-19. However, once these manufacturers reopened, the virus had spread worldwide, shutting down businesses, some temporarily and others permanently. To survive, many of these businesses shifted to online selling, which tends to have a different set of logistics requirements and, as a result, caused retailers, manufacturers, logistics, and transportation providers to stumble from lack of forewarning and preparation.

Risk mitigation and agility are valuable lessons that many retailers, manufacturers, logistics, and transportation providers learned in 2020. How they translate and implement these lessons in 2021 will determine the winners and losers as trade continues to be reshaped quickly by COVID-19.

January 2, 2021 280
Freight

Cathy is the President at Logistics Trends & Insights LLC a global logistics market research company that provides industry updates and analysis, reports, white papers and consulting.