Trading Places

By Peter Tirschwell

Robust import numbers are a red flag for port fluidity , particularly in the US .

Don ’ t look now , but contrary to widespread sentiment throughout much of last year that 2024 would be another slow year for volumes , a recovery in imports is under way , creating potential for disruption at North American ports later this year .

US import container volumes — up by doubledigit percentages in each of the first three months of the year — are broad enough across commodity groups that economists believe a long-awaited restocking is under way following the lengthy destocking that led imports to plummet off their pandemic-induced highs during much of last year , restoring fluidity to congested ports and hammering ocean rates .

US retailers on April 9 upgraded their firsthalf import expectations for the third month in a row , predicting volumes will be 11 % higher than the comparable six months in 2023 .

But the import strength goes beyond restocking , showing the impact of a recovery in housing and the US manufacturing resurgence .

“ Q1 [ volume ] looks to be up about 30 % for us , and it will be the third-best quarter in our history ,” Port of Los Angeles Executive Director Gene Seroka told CNBC in Asia on April 3 . “ The demand starts with the US consumer and all of those statistics look very strong .”

After turning positive on a year-over-year basis in October , US containerized import growth has been an accelerating trend , growing 4 % in October , 5 % in November , 10 % in December , 11 % in January , 32 % in February and 24 % in March , according to preliminary data from PIERS , a sister company of the Journal of Commerce within S & P Global . Import growth along the West Coast has been even faster this year , reflecting the return of discretionary cargo diverted to the East and Gulf coasts amid contentious longshore labor contract talks . Still , the growth has included all coasts .

Transportation economist Jason Miller said that when comparing containerized imports in January and February of this year with 2023 , the top five product categories based on US Census Bureau data — semiconductors and other electronic components , plastic products , household and institutional furniture , motor vehicle parts and household appliances — reveal the broadbased nature of the import surge .

“ We continue to see a strong upward trend in new orders reported by US manufacturers of computers and electronic products , especially with the AI boom , which is likely causing more imports of components ,” said Miller , a professor of supply chain management at Michigan State University and a Journal of Commerce analyst .

“ Furniture , appliances and plastics are likely being driven by robust single-family housing start activity , which is up 20 % or so from last year at this time ,” he added . “ More single-family starts means more furniture , household appliances , etc .” Miller also said inventory replenishment is showing signs of normalizing , meaning the destocking that contributed to the steep decline in import volumes last year may have finally turned a corner .

“ We have seen various import-centric sectors of retail and wholesale trade get inventories-to-sales ratios back to pre-COVID levels , whereas they were elevated in the start of 2023 ,” he said . “ The key issue with inventories-to-sales ratios being in balance is that replenishment orders will now be close to 1 for 1 with sales , whereas during the inventory drawdown period , replenishment orders are — by definition — less than 1 for 1 with sales .”

The surge could have legs . Economists at S & P Global Market Intelligence have been raising their forecast for US economic growth . Employment and wage growth have been strong , with US jobs growth in March blowing through expectations and driving down the unemployment rate to 3.8 %. Virtually no one is talking anymore about an impending US recession , although S & P Global believes that following robust , above-trend growth in 2023 , quarter-over-quarter annualized real US GDP growth will slow sequentially , from 3.2 % in the fourth quarter of 2023 down to 1.3 % by the fourth quarter of 2024 .

But for the moment at least , robust import numbers are a red flag for port fluidity , particularly in the US , which has a history of underinvestment in marine terminal capacity . Indeed , history has shown that congestion will rear its head at major gateway ports when volumes surge .

There have been some initial signs of congestion resulting from the strong import volumes . At the ports of Los Angeles and Long Beach , while there have been no vessel backups , rail dwell times rose from 4.7 days in January to 6.3 days in February , according to the Pacific Merchant Shipping Association . Marine terminals and railroads acknowledged backlogs that they have been working through .

Similarly , the Port of Vancouver has been dealing with rail container backlogs since early in the year , primarily due to a surge in imports . Watch for more congestion if the import numbers continue their current growth trajectory .

email : peter . tirschwell @ spglobal . com

46 Journal of Commerce | April 22 , 2024 www . joc . com