Ports across the United States have recently seen a decrease in container imports demands. This surprises many with the high volumes of imports into the U.S. in early 2022. The number of vessels waiting outside Los Angeles/Long Beach ports decreased from over 100 in January to under 30. From May 24 to June 7, container imports dropped an estimated 36%. While some believe this is the calm before the post-Shanghai lockdown storm, others see it as something more positive. Over the past year and a half, COVID led to massive port congestions and backlogging supply chains. This decline in container ships could be a potential sign of relief.
One of the reasons for the reduction in west coast ports is carriers moving freight to east coast ports. The east coast ports became more attractive after the congestion months ago created a logjam in west coast ports. What is interesting is that east coast ports are also facing a reduction in container imports. The drop is leading many to speculate that imports will reach pre-pandemic levels. However, it may be too soon to predict how inflation will impact the international shipping industry in the coming weeks. The vessels that left ports overseas on the trans-Pacific are expected to reach the U.S. by June.
The Impact of Inflation
Inflation has made its way around the world and has affected different industries such as oil and food. Compared to March last year, inflation has risen an estimated 8.5%, as the Bureau of Labor Statistics reported. This is a 40-year high, with the previous highest rate being 7.9% in December 1981. The price increases are due to multiple factors such as the war in Ukraine and post-COVID demand. The geopolitical risks of the Ukraine war have also led to companies keeping their goods as inventory in the U.S. As inventory builds up in the U.S., new orders from overseas are slowed down, decreasing imports.
The increase in prices may have directly influenced the decrease in demand. Now that inflation has risen to substantial levels, the customer could be spending less on goods than before. With fewer goods purchased, fewer container vessels are being brought into U.S. ports internationally. It may be too early to tell if inflation significantly affected the decrease in U.S. port imports.
Can this Be a Good Thing?
The decrease in imports to pre-pandemic levels may indicate a return to normality for the world of shipping. Alongside the U.S. port imports lowering are the container rates spot rates from China to west coast ports. On a month-to-month basis, the spot rate has gone down over 30% since March 28, 2022. With container shipping rates lowering, this can tremendously benefit shippers transporting goods internationally. It may cost less to ship freight compared to a year ago. The container capacity to move freight has risen compared to last year, which shippers can take advantage of.
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