Some of the largest ports in the USA are reporting a gradual increase in their cargo volumes. This article explores the logistics sector’s implications and other businesses that rely on it. It has been two months since the Port of Los Angeles anticipated any inbound container volumes to exceed the comparative figures for the preceding years. Now the tide seems to be changing slightly, and some experts inject optimism into their market analysis.
Estimates have been optimistic once again
LA’s Wabtec Port Optimizer provides the new estimates last Tuesday. According to them, this past week had scheduled 26 vessels estimated to hold about 127,000 containers, each measuring 20-feet. This is a 0.4% increase compared to the same week in 2021. This week, the news is even better, with 27 ships expected to be loaded with 137,000 TEUs. This is an increase of 15.1% compared to the same week in 2021.
It is important to note that port tracking data is fluid. There may be daily revisions that could go either way. Therefore, some caution must be exercised when thinking about this as a major trend that will continue. The information coming in over the next few weeks will demonstrate whether this increase in projections was a mere blip or an early indicator of systematic changes in the current market.
Ports are looking to Asia and China for new business
Now that China is beginning to ease some of the Covid-19 restrictions that had been reinstated with the latest outbreak, there may be a bigger wave of goods from Asia. The impact of the lockdown in China should not be underestimated since that country has effectively become a major manufacturer, supplier, and exporter to the USA. The projects we are seeing now are likely to be watched carefully to understand their real implications.
The USA turnstile for international trade is heading toward crunch time. The peak season is anticipated much earlier than usual for the summer. Additionally, there are contract talks between West Coast dockworkers and employers. High volumes need the staff so the industry can ill-afford any significant disruptions. So far, the encouraging projections are not restricted to one port, so this may portend good news overall.
Neighboring ports are reporting better projections
The Port of Long Beach has followed suit with some positive projections. It is anticipated that 25 container vessels will arrive during the week covering the 3rd of July 2022. If that were to happen, there would be a rise of 15 vessels compared to the projections from next week. The weekly import volumes at Long Beach are expected to comprise about 424,000 TEUs.
This average is likely to apply for this week and the coming weeks up to the beginning of July. This is a good projection compared to 357,000 TEUs managed in June last year. If those figures were to hold up, the ports are seeing an increase in business. The implication is that the ports must prepare for an uptick in volume, including ensuring that the right staff and capacities are available.
Global supply chain pressures are beginning to stabilize
After a period of projections that could sometimes be surprising and concerning, the supply chain may be heading towards an even keel. May showed that the supply chain is getting to grips with the post-Covid 19 challenges. The Federal Reserve Bank of New York has indicated that these may be historically high stabilization levels.
For example, the Global Supply Chain Pressure Index fell to 2.9 in May. This is particularly significant since, in April, it was 3.4. The peak was 4.4, which occurred in December 2021. A total of 27 variables are included in calculating the supply chain pressure, including the costs of cross-border transportation and the country-level manufacturing data. The key players in the global supply chain include the USA, UK, Taiwan, South Korea, Japan, China, and the European Union.
Challenges in estimating impact of USA ports
Despite the stabilization news, some observers are not convinced about projections concerning the impact on US ports. It is not entirely clear how much freight the US shores can expect. China has re-opened, and there may be a backlog that must be dealt with first before managing the ongoing traffic. Meanwhile, it is not clear that all US ports are ready if there is a deluge of business.
Some predictions from CNBC indicate that European and US ports should anticipate a significant increase in shipments which may stabilize with time. However, others like Lloyd’s List disagree with that suggestion. They argue that the restarts in Chinese manufacturing will be gradually absorbed into operations rather than creating crisis points at ports. Nevertheless, it is vital to engage in contingency planning so that there are no severe delays that negatively impact the supply chain.
Learning from the risk of East Coast log jams
The Covid-19 era created significant challenges for the shipping industry and port handling services. There is little excess capacity with which to play. Indeed, the East Coast is not likely to provide a safety valve if there is excessive pressure on the supply chain. Once South California begins to struggle, the rest of the USA will feel the pinch. The East Coast is also not providing encouraging news.
Port officials from Georgia, Savannah, and New York are issuing early warnings about the risk of congestion. Part of the pressure is due to routes being changed to avoid the potential difficulties on the West Coast. Manufacturers and retailers in the USA have padded up their inventory as they assume that customer demand will eventually wane after a high.
Inventory padding means more quick orders
Once businesses start building up inventory, the supply chain must cope with increasing demand. However, the US Logistics Managers’ Index was released on Tuesday, indicating that inventory levels are exceedingly high. This is an unseasonal trend and has led to increased costs of storage or processing. Meanwhile, congestion is building up in Europe. Vincent Stamer, head of the Kiel Trade Indicator, suggests that the congestion is reaching the North Sea.
As China opens for business following the Covid-19 secondary lockdown, there is an anticipation of increasing potential for congestion at US ports as business picks up. Already US ports are indicating higher projections over the coming weeks regarding volume. US ports must prepare for potential congestion and increasing traffic.