Date: Friday, May 12, 2023
Source: Sourcing Journal
Cargo containers imported into the U.S. from China bounced back in April, reversing a months-long downward trend that started last summer.
Goods originating out of China increased 26.7 percent month-over-month in April 2023 to 742,692 20-foot equivalent units (TEUs), but remain down 26 percent from their August 2022 high, according to data collected by Descartes Datamyne.
China represented 36.8 percent of total U.S. container imports in April, a 5.2-percent jump from March, but still down 4.7 percent from the high of 41.5 percent in February 2022.
Across the top 10 countries of origin for products imported into the U.S., China took up 82 percent of the total percentage increase in container volume. U.S. container import volume in April 2023 from all 10 sourcing markets increased 15.4 percent on a month-over-month basis to 190,962 TEUs. Hong Kong had the second-largest volume increase behind China’s sequential growth, at 24.4 percent, while Taiwan came in third at 19.3 percent growth.
For the first time since 2020 when Covid-19 spread worldwide, April container import volume increased over the prior month. In both 2021 and 2022, April saw a dip in container imports after a strong March before escalating again in May.
April 2023 U.S. container import volumes increased 9 percent from March 2023 to 2.02 million TEUs. When tallying year-over-year changes, TEU volume was down 17.8 percent from April 2022, but up 5.3 percent from pre-pandemic levels during April 2019. The growth in container import volume in April continued to track to 2019 volumes for the first four months of 2023 with a difference of 1.5 percent for the same period in each year.
Overall, China’s exports have seen a rebound in the first quarter of 2023, with the Administration of Customs of China reporting that exports rose 0.5 percent over the same period in 2022 to $821.8 billion in the first three months of the year.
March reflected China factory reopenings after Lunar New Year, according to Container XChange‘s report. It cited the customs agency’s data in its May container logistics report, noting that exports rose 14.8 percent in March from the year-ago period after months of declines, dragging up the 6.8 percent decline in January and February, the customs agency said.
Exports to the U.S. and the 27-nation European Union, both China’s biggest foreign markets, declined after the U.S. Federal Reserve and other central banks raised interest rates. In March, exports to the U.S. slid 7.7 percent to $45.9 billion, an improvement over the 21.8 percent contraction in January and February.
Supal Shah, CEO of Indian container logistics company Arcon Containers, told Container XChange on the outlook, “The freight rates and container prices seem to have bottomed out; I don’t see big change on either side as there is a huge supply of equipment. On the positive side, Chinese factories are not producing too many new units so over the long run this will have a positive impact on demand and supply and price of the containers.”
To gauge the second-half outlook, Container XChange surveyed 1,200 supply chain professionals last month on their biggest looming challenges. It found that 49 percent of respondents are worried about a recession in the U.S.
“Interest hikes by central banks due to sticky inflation has put the balance sheets of many lenders under pressure, essentially forcing them to mark down assets or sell them off at a loss to cover short-term liquidity needs,” said Christian Roeloffs, co-founder and CEO of Container XChange, in a statement.
Roeloffs pointed to the global banking crisis that saw the collapse of Silicon Valley Bank and First Republic Bank and Signature Bank, as well as troubles in the real estate sector, as areas that negatively impact interbank lending.
“Higher cost of interbank lending will lead to tight access to credit for the real economy and this in turn leads to higher risk of recession,” Roeloffs said.
Geopolitical tensions, according to 32 percent of supply chain professionals, and rising operating costs, as per 22 percent are other top areas of concern.
Container XChange forecasts the higher expenses even after profit margins for shipping lines remained strong in the first quarter, since many contract rates had already been pre-negotiated. As the contract negotiations are underway, the firm anticipates to soon see revised rates which will then impact the profitability of the shipping lines in the second half of 2023 and into next year.
“The container market, in general, is very volatile currently, it changes every week, so there is risk in predicting what will turn out after six months,” said Aaron Callahan, the owner of container trading company Tier 1 Equipment Sales. “We face high demurrage and detention charges, operating costs and other charges pertaining to container storage and transfers. The demand is not coming back anytime soon, on the other hand, the capacity and supply of containers is abundant. Most of us are trying to build resilience and consistency in our operations. This is business critical.”
“There is a shortage of depot space too,” Aaron added.
East Coast ports, namely the Port of New York & New Jersey and the Port of Savannah, continue to attract shipping volume.
According to Descartes Datamyne, which covers more than 75 percent of the world’s import-export trade, overall U.S. container import volume across the top 10 ports in the country increased 10.9 percent from March to April, or by 167,174 TEUs.
The Port of New York & New Jersey saw container volume surge 19.3 percent, an increase of 54,466 TEUs, while the Port of Savannah saw 14.6 percent growth of 24,923 TEUs. This growth is somewhat counterintuitive given that China volumes increased dramatically which should favor West Coast ports. Baltimore had the largest individual growth in container shipments, growing 26.1 percent by 9,717 TEUs.
Only the Port of Tacoma experienced a month-over-month decline at down 1.4 percent.
On the whole, top West Coast ports are seeing more container volume than their East Coast counterparts.
“Comparing the top five West Coast ports to the top five East and Gulf Coast ports in April 2023 versus March 2023 shows that, of the total import container volume, top West Coast ports increased to 43.9 percent (up 0.9 percentage points) and top East and Gulf Coast ports increased slightly to 47.9 percent (up 0.2 percentage points),” wrote Chris Jones, executive vice president of industry and services, Descartes Systems Group, in a blog post. “Led by growth at the top West Coast ports, the top 10 ports gained share in April 2023 compared to smaller ports, as the top 10 represented 91.8 percent of all volume compared with 82.8 percent in January 2023.”