Import Volumes Still at Record Levels but Port Congestion Eases

The global shipping crisis continued through March. March 2022 experienced another year-over-year record in container import volume versus 2021. COVID-related shutdowns in China continue to spread and are eclipsing the Russia/Ukraine conflict as the primary factor that could create the greatest disruption in the near future. The April update of the logistics metrics Descartes is tracking point to continued congestion and unpredictable global supply chain performance for the rest of 2022.

March continued the very strong start to 2022 with another monthly record for U.S. container import volume (see Figure 1). Container import volumes were up 11% from February 2022 to almost 2.6 million TEUs and up 1% from March 2021 and 44% from pre-pandemic March 2019. March was also the second highest import volume in history, only eclipsed by August 2021 which falls in peak season for ocean imports.

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

Source: Descartes Datamyne™

March U.S. container import volumes from China were down 1.4%. This is a small decrease considering that there is a 35+ day delay between the time goods set sail to the time they arrive, and that March includes the Chinese Lunar New Year period, which is traditionally soft for Chinese exports. Imports from Vietnam, India, Taiwan, South Korea and Thailand and other countries more than made up for China’s shortfall.

The shift of volume away from the major West Coast ports reversed itself in March 2022. Comparing the top five West Coast ports to the top five East Coast ports in March 2022 versus February 2022 shows that, of the total import container volume, East Coast ports declined to 41.4% of the total while West Coast ports represented 45.0%. In February, the split was East Coast 44.0% and West Coast 42.4%. Also interesting is the share of volume shifting away from the top 10 ports over the last 11 months. In May 2021, the top 10 ports represented 86.9% of all volume, but March 2022 was only 86.3%. Comparing five month periods as shown in Figure 2, all top West Coast ports (orange) declined in volume while all top East Coast ports (blue) increased except Savannah. The Port of Los Angeles remained in the top spot at 464,600 TEUs in March, growing ~60,000 TEUs versus February but still down from its high of 530,432 TEUs in May 2021.  

Figure 2: Container Import Volume Shifts at Top 10 Ports

Source: Descartes Datamyne

Almost across the board, ports reduced delays in March (see Figure 3). This is encouraging since U.S. import container volume was the second highest in history.

Figure 3: Top 10 Ports Monthly Average Delay (in days)

Port	February	March
Los Angeles	15.1	11.6
Long Beach	12.9	10.0
New York/New Jersey	15.5	14.5
Savannah	10.6	9.7
Norfolk	15.1	13.5
Houston	13.0	12.1
Charleston	16.0	15.9
Oakland	15.6	23.3
Seattle	17.7	8.3
Tacoma	12.9	7.7

However, as long as monthly U.S. container import volumes are above 2.4M TEUs, port congestion issues will continue until infrastructure changes are made. Port congestion became a significant issue when the U.S. consistently exceeded import volumes of 2.4 million TEUs per month starting in March 2021. To put this in context, 2021 container import volume was 18% higher than 2020 and 22% higher than 2019. That is a significant volume increase for U.S. infrastructure to efficiently absorb without capital investment to improve container processing capacity at ports.

As has widely been reported, China’s “zero-COVID” policy has locked down numerous cities and ports in March. These lockdowns are likely to create a roller coaster effect on container import volumes starting in late April and beyond because of the 35+ day elapsed time for ocean crossings. While there may be short-term reprieves for U.S. ports in late April and May, Chinese manufacturing will come back online and containers stuck in China will enter the country at some point. This timing, however, could start to coincide with peak season ocean shipping, artificially making port congestion worse in the second half of the year. At a minimum, it will make logistics and inventory planning much more complicated and fraught with errors.

Another lesson learned from the Chinese lockdowns is that we are likely to experience “waves” of COVID variants travelling the world for some time to come. While new strains of the coronavirus do not appear as lethal, it’s surprisingly resilient and the impact it has on supply chain performance will continue.

The big question on the minds of importers and LSPs is when, or if, a decline in import volume will occur in 2022. 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 consistently high level will continue to stress ports and inland logistics until infrastructure can be enhanced. March container import volume was the second greatest ever at almost 2.6M TEUs.
• 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. There was a slight reduction in wait times early March and, considering the increased volume, ports appear to be more efficiently moving cargo.
• Continuing impact of the pandemic. New variants are driving shockwaves through global supply chains. Whether it’s cities in China on full lockdown, swaths of employees out sick or country-based restrictions, a lack of resources will constrain the ability of supply chains to recover. COVID was back in force in China in March and its impact on imports will be seen in the months to come.
• 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. The April jobs report showed another month of solid growth. The latest FRED numbers released in early April (but are from early February) show them to be relatively consistent with the last 12+ months.
• ILWU contract negotiations. The negotiations could be uneventful or they could turn port operations and supply chains upside down in the first half of 2022 and possibly beyond. No change in March, but positive signs from the union that there will be earnest negotiations starting in May.
• 2022 Beijing Winter Olympics. Coming right after the Chinese Lunar New Year, China’s desire to reduce pollution could curtail manufacturing and logistics operations and reduce the ability of importers and LSPs to use the traditionally lower volume import season to catch up. March showed a small decline in container import volume originating from China.
• 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. In early April, inflation continued to rise and the effect of the Russia/Ukraine conflict on fuel costs continues.

March was another overachieving import month.

March U.S. container import volumes set yet another record. However, China’s COVID lockdown policy could extend today’s global supply chain challenges and drive greater uncertainty. This data reaffirms that it will be some time before the pressure on supply chains and logistics operations begins to lift. 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. Our current perspectives and recommendations are largely unchanged, with the exception of the changes in bold below:

Short-term:

• 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.
• Shipping capacity constrained? Rationalize SKUs to ship higher velocity and margin goods to maximize profitability.
• 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.
• Accelerate inventory coming in through West Coast ports now or use alternate ports as a hedge against upcoming ILWU contract negotiations.
• Track the spread of COVID variants to determine when they will hit critical parts of the supply chain. As COVID variants come in waves, they travel across the globe unevenly and create disruptions. Use tracking sites such as The New York Times to better understand their path and impact on global supply chains.

Near-term:

• Shift the movement of goods to less congested transportation lanes 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 are potentials for conflict. Density creates economy of scale but also risk, and the pandemic and subsequent logistics capacity crisis highlight the downside. Conflicts do not happen “overnight” so now is the time to address this potentially business disrupting issue.