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October 1 2018

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"A little-known fact by our administration is that half of our imports goes into our manufacturing stream, the types of jobs this administration wants." 34 The Journal of Commerce | October 1 2018 www.joc.com Asia Trade: Third-Quarter Review and Outlook Special Report That surge, combined with carriers trimming capacity to the US West Coast 6 percent and capacity to the East Coast 1.3 percent, drove year-over-year growth in spot rates to new highs in 2018 and led to rolled cargo as capacity filled up and shippers worked to build inventory. US Census inventory-to-sales ratio data show US inventories rose 0.6 percent in July following a 0.1 percent increase in June. Retail inventories rose 0.5 percent in July after slipping 0.1 percent in June, cor- responding with the nearly 10 percent growth in import volume in July. "The extra-loaders for sure are taking pressure off the market," said Ernie Kuo, senior vice president, Pacific International Lines, USA Agency Services. "My understanding is they are full." Carriers such as HMM, CMA CGM, Maersk, and Evergreen an- nounced in September they would either up-size vessels in existing weekly services or add single-voyage extra-loader ships to fill the growing gap between supply and demand. In addition to injecting immediate capacity into a trade lane, carriers normally do not charge premium rates because they have to immediately fill 5,000 or so slots of capacity that were not anticipated when the sailing schedules were set months before. Shippers and carriers should expect import volumes to remain strong for the rest of September leading up to Golden Week in China. US retailers expect to import more volume over the coming months than they did last year, but at a less aggressive pace. The National Retail Federation's Global Port Tracker, published each month with Hackett Associates, forecasts year-over-year import growth of 4.9 percent in October, 2.6 percent in November, and 4 percent in December. Chinese New Year in 2019 is Feb. 5, or 11 days earlier than in 2018. That means the normal slack period that follows end of the peak shipping season in November will be com- pressed, and retailers in December will begin to ramp up their imports before factories in Asia close for a cou- ple of weeks beginning Feb. 5. JOC email: dustin.braden@ihsmarkit.com twitter: @dbraden38 pers front-loaded their supply chains to avoid the tariffs that will impact more than half of the US-China container trade. The slowing volume growth, along with deployed extra-loaders, put a lid on surging spot rates, with the price to move an FEU from Asia to the US West Coast up only 0.7 percent, at $2,349, in the week ending Sept 15, compared to the prior week. Eastbound spot rates to the East Coast slipped 0.2 percent in the same period, to $3,512 per FEU, according to the Shanghai Shipping Exchange's Shanghai Containerized Freight Index (SCFI). The strong year-over-year growth in spot rates corresponded with nearly 10 percent growth in US im- port volumes in July on a year-over- year and month-to-month basis, to 2.2 million TEU. US import growth slowed consid- erably year over year in August from June, increasing 1.2 percent com- pared to July's 9.1 percent year-over- year increase; import volume fell 1.5 percent from July to August, which is typically in the heart of the peak season. By comparison, the month-to-month gain in volume in August 2017 was 6.2 percent, ac- cording to data from PIERS, a sister product of The Journal of Commerce within IHS Markit. Import growth also slowed at the Canadian ports of Prince Rupert and Vancouver, both of which serve as gateways for US-bound cargo from Asia. Prince Rupert reported that laden import volume in August fell 23 percent year over year to 38,555 TEU, while Vancouver's laden import volume declined 7 percent to 135,398 TEU. "Volume in Q4 is softer than we would have thought. A little-known fact by our administration is that half of our imports goes into our manufacturing stream, the types of jobs this administration wants," Gene Seroka, Los Angeles port di- rector, said at project44's Transform Executive Tech Summit in Chicago on Sept. 13. Such signs raise questions about how dramatic the post peak season decline will be, and if it will take place earlier than normal after ship- 1.5 1.6 1.7 1.8 1.9 2 2.1 2.2 2.3 Jan- 18 Feb-18 Mar-18 Apr-18 May- 18 Jun- 18 Jul-18 Aug- 18 Millions of TEU US import volume growth stalls Source: IHS Markit © 2018 IHS Markit Monthly laden US import TEU volume with year-over-year change +9.3% +3.9% +1.5% +3.3% -0.3% +9.2% +9.1% +1.2%

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