Slight December Decline in U.S. Container Import Volumes Aligns with 2019 Levels

U.S. container import volumes in December 2022 continued to close in on 2019 volumes. Port delays, meanwhile, continued to improve, especially for the top East Coast ports as their import volumes have receded. Chinese imports again declined, but much more slowly while other countries such as South Korea and India experienced more significant drops. COVID continues to be a factor and the West Coast labor situation has not been sorted out. The December update of the logistics metrics Descartes is tracking shows more relief but continues to point to challenging global supply chain performance in 2023.

December 2022 U.S. container import volumes declined 1.3% from November to 1,929,032 TEUs (see Figure 1). Versus December 2021, TEU volume was down 19.3%, and only 1.3% higher than pre-pandemic December 2019. Note that December has the holiday season in the second half of the month which can adversely impact container import volumes.

Figure 1: U.S. Container Import Volume Year-over-Year Comparison

Source: Descartes Datamyne™

Comparing imports in 2022 to the previous six years, December would have been expected to be slightly lower than November (see Figure 2). December 2022 was fairly consistent with previous years with the exception of December 2018 (7.7%) which saw a large increase as importers advanced shipments to avoid China tariffs that were coming into effect in early 2019.

Figure 2: November to December U.S. Container Import Volume Comparison

Source: Descartes Datamyne™ 

While the overall volume was down slightly, half of the top 10 U.S. ports saw volume increases with the Port of Los Angles reporting the greatest overall increase (see Figure 3). The Ports of Houston and New York/New Jersey experienced the greatest decline.

Figure 3: November to December Comparison of Import Volumes at Top 10 U.S. Ports

Source: Descartes Datamyne™ 

The downward trend continued in December for U.S. container imports from China to 686,514 TEUs with a smaller reduction of 0.5% versus November and down 31.9% from the 2022 high in August. China represented 35.4% of the total U.S. container imports, a decline of 6.1% from the high of 41.5% in February 2022. South Korea and India experienced the greatest decline while Japan had strong growth of the top 10 countries importing into the U.S. (see Figure 4).

Figure 4: October to December Comparison of U.S. Import Volumes from Top 10 Countries of Origin

Source: Descartes Datamyne

In December, top West Coast ports reversed their market share decline versus top East and Gulf Coast ports. Comparing the top five West Coast ports to the top five East and Gulf Coast ports in December 2022 versus November 2022 shows that, of the total import container volume, the West Coast ports grew to 38.1% in December, up 1.2% versus November and the East and Gulf Coast ports declined in December to 45.5%, down 1.7% versus November. The top 10 ports again lost share in December 2022 to smaller ports, as the top 10 represented 83.6% of all volume compared with 84.1% in November 2022 and 85.9% year-on-year.

Comparing five-month periods (see Figure 5), the top West Coast ports (orange) continue to experience container throughput shifts to other ports, including the East and Gulf Coasts (blue). However, with the exception of the Port of Houston, the top East and Gulf Ports are now operating below peak volumes that started the port congestion in 2021. Returning to the top container import processing port was the Port of Los Angeles at 349,493 TEUs. The Port of New York/New Jersey fell to second at 312,763 TEUs in December 2022.

Figure 5: Container Import Volume Shifts at the Top 10 Ports

Source: Descartes Datamyne

Overall port delays in December 2022 were lower than November 2022 (See Figure 6). The major East Coast ports saw the greatest decrease and had no double digits wait times. The major West Coast ports are all now well below 10 days and somewhat stabilized. Much of the progress can be attributed to the continued reduction in volume that the majority of ports are experiencing. While wait times have made significant progress, schedule reliability still remains low when compared to pre-pandemic numbers. According to FreightWaves/Sea Intelligence, schedule reliability is almost 20% lower than 2019.

Figure 6: Monthly Average Delays (in days) at Top 10 Ports

Source: Descartes Datamyne™

Note: Descartes’ definition of port delay is the difference as measured in days between the Estimated Arrival Date, which is initially declared on the bill of lading, and the date when Descartes receives the CBP-processed bill of lading.

The labor situation remains unchanged and presents continued risk to West Coast port operations. The International Longshore and Warehouse Union (ILWU) contract expired on July 1; however, business has proceeded as usual with the union working with management. Until now there has been no impact on container processing as has been the case in the past. California law AB5 still remains a significant issue with no resolution in sight and there is a risk that more AB5-related stoppages could occur in other California ports in the future causing greater disruption. The continuing labor uncertainty could be a significant reason why import volumes are not shifting back to major California ports despite their improving situation.

The Chinese government has just revised its COVID policies in an effort to minimize the disruptions to society and business. COVID infection is widespread and given that the Chinese population has little to no immunity, the impact of COVID on manufacturing supply chains could continue for quite some time.

Key economic indicators provide a mixed view of the U.S. economy and, ultimately, demand for imports. Employment increased by 223,000 jobs in December and unemployment declined to record levels at 3.5%. Strong employment numbers often put pressure on supply chain and logistics operations as they are labor intensive and compete more broadly to find resources. Inflation remains high and the U.S. Federal Reserve will again evaluate the need to raise interest rates which could dampen inflation. According to the U.S. Energy Information Association, gasoline costs, a significant contributor to high inflation rates, declined slightly to $3.22/gallon and is back to 2021 prices for the same period. Diesel costs also saw a reduction to $4.58/gallon. Both are likely to remain elevated for the foreseeable future given the disruption of global energy markets as a result of the war in Ukraine and subsequent sanctions on Russia.

U.S. import volume declined again in December and now the question is will 2023 look more like 2019, but with more supply chain turbulence. In addition, several significant one-time events could exacerbate the ability to move goods globally. Here’s what Descartes will be watching:

• Monthly TEU volumes between 2.4M and 2.6M. This level will continue to stress ports and inland logistics until infrastructure can be enhanced. December U.S. container import volume is approaching 2019 levels.
  
• Port wait times. If they decrease, it’s an indication of improved port processing capabilities or that the demand for goods and logistics services is declining. Port wait times were down again slightly in December at East and Gulf Coast ports.  
  
• Continuing impact of the pandemic. The spread of COVID subvariants continues to add uncertainty to the trajectory of the pandemic and impact supply chains in unpredictable ways as different countries are affected at different times and for different durations. China has relaxed its rules and now faces more widespread COVID and it will be a while before the country builds a level of immunity to not impact manufacturing and supply chain operations.
  
• Key economic indicators such as the inflation rate, monthly BLS Jobs Report, FRED Inventory to Sales Ratio and FRED Personal Consumption Expenditure: Durable Goods. A fundamental change in consumer buying behavior from services to goods occurred early in the pandemic and was the force behind the dramatic increase in U.S. container import volumes over the last two years. Consumer spending continues and the December numbers for jobs are still contrary to the expected impact of high inflation figures and fuel prices. Continued strong hiring numbers puts pressure on supply chain and logistics operations’ ability to have adequate resources to meet customer demand.
  
• ILWU contract negotiations. The ILWU contract has expired, but to date there hasn’t been an impact on West Coast port operations; however, California AB5 has the potential to cause more disruptions to California port operations. There has been no indication of progress or a date for an agreement.
  
• Inflation and the Russia/Ukraine conflict. Inflation may be the only way to slow down the strong U.S. economy and ultimately help to alleviate the global logistics capacity-related problems that exist. Inflation remained high in December. Both diesel and gas prices have softened but remain high due to the effect of the Russia/Ukraine conflict.

The continued decline in December 2022 U.S. container import volumes, along with the November numbers, point to imports operating closer to pre-pandemic levels in 2023. The U.S. economy remains relatively strong despite numerous pressures to slow it down. The decline in volume in the last quarter of the year is finally benefitting top East and Gulf Coast ports. Unresolved labor-related issues are keeping importers from moving volume back to the West Coast. This data reaffirms that the pressure on supply chains and logistics operations has begun to lift, but there are still issues that can cause further disruptions. Descartes will continue to highlight key Descartes Datamyne, U.S. government and industry data in the coming months to provide insight into the global shipping crisis. We are staying the course with our current perspectives and recommendations:

Short-term: 

• Monitor the impact of California law AB5 on owner-operators serving California ports for potential disruption or degradation of port container processing performance.
  
• Monitor ILWU contract negotiations for progress.
  
• Track the spread of COVID variants to determine when they will hit critical parts of the supply chain, especially in China.
  
• Track ocean shipments and carrier performance as there is still a considerable gap between original ETAs and actual ones. 
  
• Evaluate the impact of inflation and the Russia/Ukraine conflict on logistics costs and capacity constraints. Ensure that key trading partners are not on sanctions lists.
  
• Focus on keeping the supply chain resources you have, especially drivers. The old adage “a bird in the hand is worth more than two in the bush” definitely applies here. Building trips to reduce stress and improve quality of life to retain drivers is now as or more important than wage increases.

Near-term:  

• Continue to look for less congested transportation lanes, including smaller ports, to improve supply chain velocity and reliability. Total transit time is important, but so is supply chain predictability. Evaluate alternative transportation lanes into the U.S., including entry through northern and southern borders and inland ports.

Long-term:  

• Evaluate supplier and factory location density to mitigate reliance on over-taxed trade lanes and regions of the globe that have the potential for conflict. Density creates economy of scale but also risk, and the pandemic and subsequent logistics capacity crisis highlights the downside. Conflicts do not happen “overnight” so now is the time to address this potentially business disrupting issue.

Note: This report uses the initial compiled release of U.S. Customs and Border Protection (CBP) data and is subject to revision at a later date by CBP. The revised data can be seen in Descartes Datamyne.