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November Sees 9% Drop in US Container Imports; Panama Drought Affects East and Gulf Coast Ports

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November Sees 9% Drop in US Container Imports; Panama Drought Affects East and Gulf Coast Ports

Descartes Systems Group (Nasdaq: DSGX) (TSX:DSG), the global leader in uniting logistics-intensive businesses in commerce, released its December Global Shipping Report for logistics and supply chain professionals. In November 2023, U.S. container import volume decreased 9% from October 2023, with East and Gulf Coast ports experiencing the greatest declines. While the decrease is large, it’s consistent with monthly reductions at the end of prior years. Imports from China also continued to decline, but at a slightly faster pace than the overall numbers. The Panama drought finally appears to be negatively impacting U.S. container import volume at East and Gulf Coast ports, which could worsen with the Panama Canal Authority’s plans to further reduce the number of daily transit slots in coming months. The December update of the logistics metrics Descartes is tracking shows a decline consistent with seasonal import patterns and signs that global supply chain performance improvements have stalled.

November 2023 U.S. container import volumes decreased 9.0% from October 2023 to 2,099,408 twenty-foot equivalent units (TEUs) (see Figure 1). Versus November 2022, TEU volume was higher by 7.4%, and up 10.4% from pre-pandemic November 2019. The growth in import volume over the first eleven months of 2023 is within 4.0% of the same period in 2019.

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

Source: Descartes Datamyne™

“November has traditionally been a weaker month than October and while the decline is steep, it is consistent with other years’ performance,” said Chris Jones, EVP Industry at Descartes. “The impact of the drought in Panama is finally hitting as volumes at the Gulf Coast ports (see Figure 2) and, in particular, the port of Houston(-26.7%) are considerably lower than the overall decline. East Coast ports experienced a significant decrease as well.”

Figure 2: U.S. Gulf Coast Container Imports for 2023

Source: Descartes Datamyne™

The November report is Descartes’ twenty-eighth installment since beginning its analysis in August 2021. To read past reports, learn more about the key economic and logistics factors driving the global shipping crisis, and review strategies to help address it in the near-, short- and long-term, visit Descartes’ Global Shipping Resource Center.

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Descartes Releases September Global Shipping Report: August U.S. Container Import Volumes Increase Slightly from July and Continue to Track 2019 Performance

Descartes Systems Group (Nasdaq: DSGX) (TSX:DSG), the global leader in uniting logistics-intensive businesses in commerce, released its September Global Shipping Report for logistics and supply chain professionals. In August 2023, U.S. container import volume increased slightly compared to July 2023, which is fairly consistent with the pattern that occurs in peak season in non-pandemic years. Despite the volume increase, port transit times remained close to their lowest levels since Descartes began tracking them. The U.S. West Coast labor situation is resolved. While the Panama drought is impacting some types of shipping, U.S. container imports do not appear to be affected to date. The September update of the logistics metrics Descartes is tracking shows continued consistency with 2019 results and signs that key challenges to global supply chain performance in 2023 have stabilized.

August 2023 U.S. container import volumes increased 0.4% from July 2023 to 2,196,268 twenty-foot equivalent units (TEUs) (see Figure 1). Versus August 2022, TEU volume was lower by 13.2%, but up 2.5% from pre-pandemic August 2019. The growth in import volume over the first eight months of 2023 is within 2.1% of the same period in 2019.

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

Source: Descartes Datamyne™

“In August, U.S. import container volume flattened and is still relatively consistent with the peak season patterns we would see pre-pandemic,” said Chris Jones, EVP Industry Descartes. “While the drought in Panama is affecting some shipping traffic, U.S. container import volumes do not appear to be impacted as volumes at the Gulf ports over the last two months have been at their highest levels this year (see Figure 2) and transit times have been consistently low.”

Figure 2: U.S. Gulf Coast Container Imports for 2023

Source: Descartes Datamyne™

The September report is Descartes’ twenty-fifth installment since beginning its analysis in August 2021. To read past reports, learn more about the key economic and logistics factors driving the global shipping crisis, and review strategies to help address it in the near-, short- and long-term, visit Descartes’ Global Shipping Resource Center.

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Crafter’s Companion Improves Fulfilment Efficiency by 25% and Reduces Error Rate to Less Than 1% with Descartes Ecommerce Warehouse Solution

Descartes Systems Group, the global leader in uniting logistics-intensive businesses in commerce, announces that international craft retailer Crafter’s Companion has implemented Descartes’ cloud-based ecommerce warehouse management solution (WMS) to improve the efficiency of its warehouse operations. In addition to realizing higher customer satisfaction as a result of faster order processing, the company’s error rate in fulfilment has dropped significantly by increasing the accuracy of its existing pick and pack process using barcode-based scanning processes.

“At Crafter’s Companion, our customers are at the heart of everything we do and being a dynamic and agile business allows us to deliver solutions that really benefit our customers. With the new solution, we have achieved a 25% increase in fulfilment efficiency with an error rate of less than 1%,” said Mark Allsop, CEO of Crafter’s Companion. Sara Davies, founder and creative director of Crafter’s Companion, added: “We’re thrilled to be working with Descartes and implementing its ecommerce WMS in our global, 54,000 sq ft distribution center is an important milestone for the business. The software is helping us operate to our full potential, as we continue to service our amazing worldwide community of customers.”

Part of Descartes’ ecommerce solution suite, the Descartes ecommerce WMS helps direct-to-consumer brands and ecommerce retailers drive significant efficiencies across order fulfilment processes to provide a remarkable customer experience. The solution helps ensure that retailers can ship on time, ship the right items, not oversell existing inventory, and have full transparency into warehouse operations. The solution is pre-integrated with major ecommerce platforms, such as ChannelAdvisor, Shopify Plus, Brightpearl and others, to accelerate implementation and time to value. Order information is automatically available to be executed via mobile-driven multi-order pick-and-pack strategies and then fed into Descartes and third-party parcel shipment systems.

“We’re proud to enable Crafter’s Companion to pursue its global growth strategy with scalable processes and highly accurate fulfilment operations,” said Dirk Haschke, VP & General Manager, Ecommerce at Descartes. “The company’s focus lies on its customers’ satisfaction and by ensuring efficient intralogistics processes, Descartes’ ecommerce WMS helps to fulfil the promises made.”

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The Shifting US-China Trade Landscape 

In the wake of pandemic-driven supply chain disruptions, U.S. trade flows are realigning, shifting away from overreliance on China as American companies move to diversify sourcing channels to mitigate risk. During the pandemic, U.S. firms experienced firsthand the disastrous effects of concentrating their supply chains in one geographic area or with single suppliers. While the Covid impact on the supply chain has waned, companies are facing other challenges to the flow of goods, from the increasing frequency of climate-related disruptions to sanctions repercussions stemming from China’s human rights abuses in Xinjiang.

Ongoing trade tensions between China and the U.S. also continue to impact the movement of goods. Beginning in 2018, the previous administration rolled out tariffs on over $350 billion worth of Chinese imports, prompting American companies to buy similar goods from companies in countries not impacted by the tariffs—especially for products like semiconductors, furniture, IT hardware, and some consumer electronics. These tariffs affected approximately 18% of imports into the U.S., equivalent to 2.6% of GDP, and increased costs for about two-thirds of dutiable products across multiple industries. 

From nearshoring and reshoring to the sourcing shift to other countries, U.S. companies are seeking to mitigate supply chain risk moving forward. While China remains the dominant Country of Origin (CoO) for many of the top 10 commodity groups imported by the U.S., the country has been slowly losing its share of U.S. container import volume. 

SHIFTING TIDES

Looking back over the past 20 years of trade data, China’s share of container import volumes into the U.S. peaked in 2010 at 44.5% (50.1% including Hong Kong) (Figure 1). The country’s share was relatively stable from 2011 to 2017 and then peaked again in 2018. The 2018 peak, however, was heavily influenced by the previous U.S. administration imposing duties on select goods, causing importers to expedite shipments into the U.S. to avoid paying the incremental import fees. 

Figure 1: China’s Share of U.S. Container Imports

Source: Descartes Datamyne™

 From 2019 through to the first five months of 2023, China’s import share declined to 35.8%. Hong Kong also saw a decrease in container imports over the last 20 years, with its share peaking at 11.7% in 2004 and falling to 2.3% in the first five months of 2023. 

A VIEW INTO TOP 10 IMPORTS

A recent report from Descartes drilled down into the global trade data, analyzing the top 10 container import goods categories—by 2-digit Harmonized System (HS) codes—from 2016 to 2022 and the related top 10 CoOs for each category to examine shifts in trade volumes and the impact on TEU import share. (Note: from a historical perspective, mainland China is measured separately from Hong Kong in the analysis.)

For the top 10 goods categories during the period from 2016 to 2022, China experienced:

  • Two that grew and increased share,
  • Five that grew but lost share,
  • Two that declined in growth and share, and 
  • One that declined and dropped out of the top 10 CoO. 

Despite the rise of imports from other countries, China remained the dominant CoO in eight of the top 10 goods categories. South and Southeast Asian countries, such as Vietnam, India, Bangladesh, Thailand and Indonesia, however, usurped import share from China, having built capacity in a number of goods categories driving market share to climb across several categories—with some growing significantly faster than the overall market. 

DIVERSIFYING SUPPLY CHAINS 

An analysis of individual HS categories highlights where there has been a shift away from reliance on China, as U.S. importers begin to diversify their supply chains to find alternate sources for raw materials and finished goods. For example, between 2016 and 2022, the goods category HS-94 (Furniture, Bedding, Lighting, etc.) grew 42.8% overall in TEU import volume (Figure 2). Despite this growth, imports from China increased by only 5%, while Vietnam’s import volume grew a hefty 186.3% during the same seven-year period. Looking at market share, China’s share decreased 17.3% to 47.6% and Vietnam’s share expanded, increasing 12.4% to 24.7% from 2016 to 2022. Notably, imports from Vietnam were one-fifth of China’s volume in 2016, rising to half by 2022.

Vietnam was not the only Southeast Asian country making gains exporting products such as garden furniture, ironing boards and bedspreads in the HS-94 trade category. Starting in 2018 and continuing through 2021, other South and Southeast Asian countries, such as India (+198.6%), Indonesia (+139.6%) and Malaysia (+69.3%), experienced accelerated TEU import growth, albeit from a smaller base, with Thailand and Cambodia displacing Poland and Macau from the top 10 list. 

Figure 2: Top 10 CoO Analysis for HS-94

Source: Descartes Datamyne™

A similar trend occurred in the HS-85 goods category (Electronic Machinery, Sound Recorders, TV Equipment, etc.). While TEU import volume of products such as transformers, AC generators and batteries increased 34.8% overall between 2016 and 2022 (Figure 3), Vietnam demonstrated phenomenal growth of 556.3%, rising from the eighth to the second-largest CoO in this category. By contrast, imports from China increased only 12% and its share slipped 9.5% to 46.7% in the same period.

Thailand (+72.5%) and South Korea (+52.6%) also experienced strong container import growth, with India displacing the Philippines in the top 10 CoOs. The accelerated growth for Vietnam began in 2019 and continued through 2022, for Thailand in 2020, and for South Korea in 2020 through 2022.

Figure 3: Top 10 CoO analysis for HS-85

Source: Descartes Datamyne™

FINAL THOUGHTS

Given recent moves by the current administration to strengthen American supply chains and limit business flow with China—including the CHIPS and Science Act and the Inflation Reduction Act which funnel hundreds of billions of dollars into development of leading-edge technology and domestic manufacturing capacity—and unprecedented export controls aimed at China’s semiconductor and advanced computing industry—trade tensions with China is showing no signs of letting up.

Bracing for ongoing trade volatility, U.S. companies are seeking to create risk-resistant supply chains that provide greater flexibility in response to disruption. While sourcing shifts to alternate countries are underway for many different types of goods, decreasing China’s share of imports and dampening its growth, China remains the dominant CoO for many of the top 10 commodity groups imported by the U.S., as the country looks to maintain its production capacity and stay a significant source. 

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Descartes’ Study Reveals 60% of Consumers Quite/Very Interested in Sustainable Home Delivery Services

Descartes Systems Group (Nasdaq: DSGX) (TSX:DSG), the global leader in uniting logistics-intensive businesses in commerce, released findings from its 2023 Home Delivery Sustainability Report: Consumers Expect More! survey, which examined consumer sentiment of retailers’ sustainability practices around their delivery operations. The survey found that only 43% of consumers felt retailers were doing a good job of using sustainable delivery practices. Over 60%, however, indicated they were quite/very interested in environmentally friendly delivery methods. Additionally, 59% said they are willing to act if they’re not satisfied with retailers’ sustainable delivery efforts.

The study of 8,000 consumers across nine European countries, Canada and the United States provides retailers and logistics organizations with critical insights into the importance of sustainability in consumer purchase and delivery decisions and how perspectives vary by age and geography.

“Compared to our 2022 study, consumers are much more interested in the environmental delivery practices of retailers. They’re influenced by these factors when making purchasing decisions and willing to take eco-friendly home delivery options, which are often also lower cost delivery methods for retailers,” said Chris Jones, EVP, Industry at Descartes. “Retailers need to heed these important trends as they provide more ways to differentiate, grow revenue, create greater customer loyalty and reduce delivery costs.”

The study analyzes consumer sentiment around the sustainability of retailers’ delivery operations, how this is impacting purchasing decisions, how consumers evaluate retailer efforts in sustainable delivery, which goods are most impacted by sustainable delivery performance and how consumers want to receive goods. In addition, it delves into the changes in purchasing and delivery decisions that consumers are willing to make to help the environment. Lastly, it provides insight into how the importance of sustainable delivery varies by geodemographic factors, the influence of geodemographics on buyer behavior, the delivery decisions consumers are making, and consumer expectations of retailers’ sustainable delivery efforts for the future. To learn more, read the 2023 Home Delivery Sustainability Report: Consumers Expect More! report.

Learn more about Descartes’ environmental practices at Environmental Impact | Descartes.

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U.S. Import Volume Growth: Is Global Supply Chain Performance Bouncing Back?

Amidst renewed whisperings of an impending recession in the second half of 2023 and the possibility of a debt default by the U.S. government that could trigger unemployment and surging interest rates, importers and logistics service providers (LSPs) are bracing for a potential hard landing. On balance, however, there are signs that a number of the challenges to global supply chain performance in 2023 are abating.

BIG GAINS IN IMPORT VOLUMES 

Partly driven by a spike in imports from China, U.S. container import volumes increased significantly in April 2023, rising 9% from March 2023 (Figure 1). Although container volume was down 17.8% from April 2022, imports were up 5.3% from pre-pandemic April 2019 and are continuing to track to 2019 levels—an encouraging trend.

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

Source: Descartes Datamyne™

In a dramatic reversal of its downward trend, Chinese imports into the U.S. increased 26.7% in April 2023 compared to March volumes—representing 82% of the total volume increase from the top 10 countries importing into the U.S—although still down 26% from the August 2022 high. Compared to March 2023, April import volumes from Hong Kong (24.4%), Taiwan (19.3%), and Vietnam (13.8%) also increased significantly. In April 2023, China represented 36.8% of the total U.S. box imports, an increase of 5.2% from March, but still 4.7% below the high of 41.5% in February 2022. 

PORT PERFORMANCE IMPROVING 

In April 2023, U.S. container import volume at the top 10 ports increased 167,174 TEUs from March levels, with the Port of New York/New Jersey showing the greatest overall container volume increase (54,466 TEUs), followed by the Port of Savannah (24,923 TEUs). Given that the dramatic increase of Chinese imports in April should have favored West Coast ports, this growth pattern is somewhat counterintuitive. 

Notably, despite the increased activity, port delays declined significantly at all of the top ports (Figure 2). Signaling that global supply chain challenges are subsiding, port transit times were at their lowest level since 2021.

Figure 2: Monthly Average Transit Delays (in days) for the Top 10 Ports 

Source: Descartes Datamyne™

Note: Descartes’ definition of port transit 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.

CHALLENGES EASING

Importers and LSPs will be relieved that the two sides in the International Longshore and Warehouse Union (ILWU) and Pacific Maritime Association (PMA) negotiations are inching towards a new contract. Talks have been dragging on since May 2022 (the contract expired July 1, 2022) but PMA and the union have reached agreement on “certain key issues.” However, PMA commented that several important issues remain unresolved and work actions led by ILWU Local 13 at the Ports of Los Angeles and Long Beach continue to disrupt some operations at key marine terminals.

While some major shippers have been diverting cargo from the West Coast to ports on the East Coast and Gulf of Mexico to avoid potential work stoppages, there has been no serious impact on container processing, as has occurred in the past. The final resolution of the contract could bring some Asia-originating containers that had shifted to rival ports back to major California ports to take advantage of the shorter transit times.

While energy prices are generally moving in the right direction, fuel costs remain elevated, exerting continued pressure on the transportation budgets of importers and LSPs. The price of gasoline—a significant contributor to high inflation rates—increased slightly to $3.60/gallon but was down $0.58/gallon from the same time in 2022, according to the U.S. Energy Information Administration. 

Diesel costs also fell slightly to $4.02/gallon, a $1.49/gallon drop from April 2022. While declining fuel costs is always good news for logistics and supply chain companies, gasoline and diesel prices are likely to remain elevated for the foreseeable due to the disruption of global energy markets caused by the war in Ukraine and follow-on sanctions against Russia.

MANAGING SUPPLY CHAIN RISK

Although recent developments appear to indicate an easing of supply chain turbulence, importers and LSPs should keep an eye on several factors and ongoing issues that could cause further disruptions, tailoring their logistics and supply chain strategies accordingly to mitigate risk and promote financial stability.

1. Union issues and labor laws:

Logistics companies should closely monitor the progress of the IWLU-PMA contract negotiations. Progress is tediously slow but movement in either direction will impact port performance and the ability of importers to efficiently move their goods where they need to go. In addition, California’s AB5 legislation has the potential to cause more disruption at California’s port operations.

2. Port activity:

Importers and LSPs need to keep a close eye on import volumes and port transit times. Recent U.S. container imports are continuing to align with 2019 volumes but, if monthly TEU volumes surge to between 2.4M and 2.6M, as witnessed during the pandemic, ports and inland logistics would be under significant strain. 

Logistics companies should continue to seek out less congested transportation lanes, including smaller ports, to improve supply chain velocity and reliability. Evaluating alternative transportation lanes into the U.S., including entry through northern and southern borders and inland ports, is also a smart strategy to allay risk.

If port transit times decrease, as they did in April, it’s an indication that the efficiency of global supply chain capabilities has improved or, alternatively, that the demand for goods and logistics services is declining. Either way, pressure on the ports is relieved—good news for logistics-oriented companies.

3. Russia/Ukraine war and inflation

Importers and LSPs should monitor the ongoing impact of the Russia/Ukraine conflict on their logistics costs and capacity constraints, while ensuring that their key trading partners are not on sanctions lists. 

On the economic front, the latest Consumer Price Index report available (March 2023) showed a continuing decline in inflation, but the inflation rate remains elevated. Fuel prices—inextricably linked to inflation and a major component of logistics companies’ operational costs—should be monitored closely. Given that fuel prices will remain elevated indefinitely due to the war, logistics companies should evaluate ways to increase the fuel efficiency of their fleets, such as route optimization software or alternative-fuel vehicles. 

4. Ongoing pandemic impacts

While WHO recently declared that Covid-19 no longer represents a global health emergency—and the U.S. followed suit, terminating its federal COVID-19 Public Health Emergency act—the pandemic continues to impact global supply chain performance, especially in China. In fact, a 2023 analyst report declared that sourcing from Chinese manufacturers is tied to the largest supply chain risks; the possibility of delays and cancellations from Chinese suppliers is high due to the likelihood of COVID-19 localized disruptions in the country. 

FINAL THOUGHTS

The good news is that the pressure on supply chains and logistics operations is continuing to ease. However, we’re not in the clear just yet. Several challenges—from labor issues, elevated fuel prices, and economic uncertainty to the impact of the war in Ukraine and the lingering pandemic-related disruptions—continue to stress logistics operations. But by proactively monitoring key supply chain performance and economic indicators, importers and LSPs can address any capacity constraints or supply chain disruptions that may arise in the short term, while building long-term supply chain resilience to mitigate risk in the latter half of 2023 and beyond.

 

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Descartes Releases April Global Shipping Report: March Volumes at Top West Coast Ports Increase Significantly

Descartes Systems Group, the global leader in uniting logistics-intensive businesses in commerce, released its April Global Shipping Report for logistics and supply chain professionals. U.S. container import volumes in March 2023 increased significantly from February 2023, largely driven by the Ports of Los Angeles and Long Beach, which was very counter intuitive, but kept the monthly trendline aligned with pre-pandemic 2019 volumes. Despite overall increases, port transit delays stabilized for all ports. Imports from China continued their downward trend and are almost 10% lower than their high in February 2022. The West Coast labor situation has still not been sorted out. The March update of the logistics metrics Descartes is tracking shows some consistency with pre-pandemic import volume seasonality but continues to point to challenging global supply chain performance in 2023.

March 2023 U.S. container import volumes increased 6.9% from February 2023 to 1,853,705 TEUs (see Figure 1). TEU volume was down 27.5% from March 2022, but up 4.2% from pre-pandemic March 2019. Two points to consider with the March numbers: 1) March has 31 days versus 28 for February and 2) With the Chinese Lunar New Year holiday occurring in January 2023, there still could be some impact on container import volumes in early March 2023.

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

Chart, line chart Description automatically generated

Source: Descartes Datamyne™

“Container import volumes at the Ports of Los Angeles and Long Beach have been in decline, but in March they experienced significant increases (see Figure 2). 2023 continues to track 2019 volumes,” said Chris Jones, EVP Industry and Services at Descartes. “There was also good news in that the port transit delay times remained constant despite the significant volume increases.”

Figure 2: February to March Comparison of Import Volumes at Top 10 U.S. Ports

Source: Descartes Datamyne™

The March report is Descartes’ twenty-first installment since beginning its analysis in August 2021. To read past reports, learn more about the key economic and logistics factors driving the global shipping crisis, and review strategies to help address it in the near-, short- and long-term, visit Descartes’ Global Shipping Resource Center.

About Descartes

Descartes is the global leader in providing on-demand, software-as-a-service solutions focused on improving the productivity, performance and security of logistics-intensive businesses. Customers use our modular, software-as-a-service solutions to route, schedule, track and measure delivery resources; plan, allocate and execute shipments; rate, audit and pay transportation invoices; access global trade data; file customs and security documents for imports and exports; and complete numerous other logistics processes by participating in the world’s largest, collaborative multimodal logistics community. Our headquarters are in Waterloo, Ontario, Canada and we have offices and partners around the world.

intermodal cargo shipping container import logistics chain port containers

April Global Shipping Update: Import Volumes Increase Significantly at West Coast Ports

As the second quarter of 2023 unfolds, U.S. economic uncertainty continues to cast its shadow across the supply chain. While inflation appears to be decelerating, interest rates are still high and the political impasse over raising the federal debt ceiling is cause for concern, with the potential to send shock waves through global financial markets if the government defaults. In the midst of this volatile economic landscape, importers and logistics service providers (LSPs) continue to grapple with lingering supply chain challenges.

IMPORT VOLUMES REMAIN ON 2019 TRACK

Largely driven by activity at the Ports of Los Angeles and Long Beach, U.S. container import volumes increased significantly in March 2023, rising 6.9% from February 2023 to 1,853,705 TEUs (Figure 1) and keeping the monthly trendline aligned with pre-pandemic 2019 volumes. While volume was down compared to March 2022 (27.5% drop in TEU volume), imports were still up 4.2% from pre-pandemic March 2019.

When evaluating container import volumes, it’s worth noting that March 2023 numbers may be influenced by multiple factors, including the longer duration of the month (31 days vs. 28 days in February) and the potential lingering impact of January’s Chinese Lunar New Year holiday on early March import volumes.

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

Source: Descartes Datamyne™

WEST COAST PORTS MAKE GAINS

Compared to February 2023, container import volumes for the Top 10 U.S. ports in March 2023 increased 98,379 TEUs (Figure 2). The West Coast ports made strong gains at the expense of the smaller ports, with the Port of Los Angeles experiencing the greatest overall container volume increase (30%), followed by the Port of Long Beach (25%).

The surge in volume at West Coast ports seems counterintuitive given that import volumes from China continued their downward trend—declining 7.4% from February 2023 and down 41.6% from the August 2022 high—and no country had a spike in commodities or exports to the U.S. from February to March. In addition, importers have likely been shifting freight away from the West Coast ports due to the uncertainty of the ongoing—and still unresolved—contract negotiations with the International Longshore and Warehouse Union (ILWU).

Figure 2: February to March Comparison of Import Volumes at Top 10 U.S. Ports

Source: Descartes Datamyne™

Notably, for the top 10 countries of origin, U.S. box import volume increased 2.5% (30,257 TEUs) in March, with Italy (50%), Thailand (39%) and South Korea (23%) experiencing the greatest percentage increases.

PORT TRANSIT DELAYS STABILIZE

Despite the increase in container import volume, port transit delays stabilized for all ports. Overall port transit delays in March 2023 were consistent with February 2023, with transit times at the major East and Gulf Coast ports remaining slightly lower than at major West Coast ports (Figure 3).

Figure 3: Monthly Average Transit Delays (in days) for the Top 10 Ports 

Note: Descartes’ definition of port transit 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.

ONGOING CHALLENGES HINDER TRADE FLOW

Despite the March data showing consistency with pre-pandemic import volume seasonality, lingering supply chain issues continue to hamper the efficient flow of goods. While the situation has improved since the start of the year, COVID continues to impact manufacturing supply chains, especially in China where companies are still dealing with the fallout of the country’s sudden zero-COVID exit this past December.

The ILWU contract negotiations continue to drag on, with the two sides seemingly no closer to bridging the gap on their disagreements. While there has been little impact on container processing to date, tensions are rising and there are calls to bring in the federal government to assist in the negotiations to resolve the issue.

On the regulatory front, California’s AB5 labor law remains a significant hurdle for logistics and transportation providers, with big implications for truckers at U.S. ports. With no resolution in sight, the potential for AB5 protests—akin to the demonstrations at the Port of Oakland last July that lead to a 28% drop in processed cargo containers—remains a concern.

With cuts to oil production and the war in Ukraine propelling energy prices higher, elevated gasoline costs—a significant contributor to high inflation rates—remain a challenge for importers and LSPs. Indeed, the price of gasoline increased slightly to $3.50 per gallon, according to the U.S. Energy Information Administration, although it was down $0.63 per gallon from the same time in 2022. 

And while the decline in the cost of diesel is good news—decreasing slightly to $4.11 per gallon and down $1.04 per gallon from March 2022—the cost of both fuels is likely to remain elevated for the foreseeable future given the disruption of global energy markets.

TIPS TO MITIGATE ONGOING SHIPPING DISRUPTIONS 

While the pressure on supply chains and logistics operations continues to ease, ongoing issues have the capacity to cause further disruptions as the second quarter of 2023 unfolds. To manage supply chain turbulence, importers and LSPs should review their supply chain strategies to identify opportunities to mitigate risk and moderate supply chain variability.  

In the short term, logistics companies should keep a close eye on ILWU contract negotiations, potential AB5-related port disruptions or decline in port container processing performance, and the spread of any new COVID variants, especially in China, that might impact manufacturing supply chains. 

Given the current economic unpredictability, importers and LSPs should focus on retaining existing supply chain resources, especially drivers. While wage increases are important, building trips to reduce stress and improve quality of life for drivers is equally important for increasing driver retention. 

To improve supply chain velocity and reliability, logistics companies should seek out less congested transportation lanes, including alternative entry lanes through northern and southern borders and inland ports. While total transit time is a valid consideration, supply chain predictability is especially valuable during times of economic uncertainty.

Thinking long-term, importers and LSPs should implement strategies to mitigate the risk of another logistics capacity crisis down the road. Companies may consider evaluating supplier and factory location density to minimize reliance on over-taxed trade lanes and geographical regions that have the potential for conflict. 

PARTING THOUGHTS

Overall, the March U.S. container import data points to less pressure on supply chains and logistics operations, with box import volumes tracking to 2019 levels and port transit delays remaining constant despite significant volume increases at West Coast ports. Yet, despite a degree of relief from the logistical challenges that choked operations during the height of the pandemic, several current issues may cause further disruptions and threaten global supply chain performance in 2023.

COVID continues to impact available supply chain and logistics resources and operations globally, increasing supply chain performance variability, while labor-related issues such as the unresolved ILWU contract negotiations and California’s AB5 law threaten West Coast port operations. 

Although the latest Consumer Price Index report (February 2023) shows a gradual decline in inflation, the rate is still high—driving a rolling recession and continued economic uncertainty in the U.S.; diesel prices continue to decline, but gas prices have risen slightly and remain elevated due to the Russia/Ukraine conflict. By monitoring these key economic and logistics factors closely, importers and LSPs can heighten supply chain resilience to mitigate risk and strengthen operational and financial performance moving forward.

 

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Global Shipping Update: Modicum of Relief as Import Volumes Fall in Line with 2019 Levels

With the second quarter of 2023 on the horizon, importers and logistics service providers (LSPs) are wondering what lies ahead. The economic landscape is anything but predictable and there are conflicting opinions on what direction the economy will take. As for interest rates, they continue to decline but remain high. How is this uncertainty affecting supply chains? 

IMPORT VOLUMES ALIGNING WITH PRE-PANDEMIC LEVELS

U.S. container import volumes are declining and shifting back into line with 2019 volumes, to a time before the global pandemic prompted an explosion of ecommerce demand and imports soared to unforeseen heights. Indeed, import volumes saw a significant drop in February, decreasing 16.2% from January 2023 to 1,734,272 TEUs (see Figure 1). Compared to February 2022, TEU volume was down 25.0%—but was only 0.3% lower than pre-pandemic February 2019. 

While box imports continue to follow 2019 volumes, the volume decrease was the greatest of the last seven years, with the exception of February 2020 which marked the start of the pandemic (-17.9%). Notably, after an upward shift in January, Chinese imports into the U.S. returned to a downward trend in February 2023—a trend seen among all of the top countries of origin—with a volume decrease of 17.1% to 632,702 TEUs; China’s downward momentum represents a volume drop of 37.0% from the high in August 2022. 

 

It’s worth noting that February’s volumes may be influenced by multiple factors, including the shorter duration of the month (28 days vs. 31 days in January) and the impact of January’s Chinese Lunar New Year, which would see volumes materialize in late February and early March 2023. 

While overall U.S. container import volume for the Top 10 ports fell by 296,390 TEUs in February 2023 vs. January—all but the Port of Tacoma experienced declines—the volume share at top West Coast ports and top East and Gulf Coast ports remained relatively stable. West Coast ports decreased 2.8% while East and Gulf Coast ports increased 1.6% from January 2023. Compared to smaller ports, market share for the top 10 ports, however, has been steadily declining since mid-2022, with February 2023 representing the lowest share (82.8% of total volume) in the last year.

LESS VOLUME SHORTER WAIT TIMES

Despite fewer goods on the move, port transit delays increased for the top West, East and Gulf Coast ports, indicating ongoing supply chain turbulence. The West Coast ports are faring the worst, as transit times increased from 0.1 to 1.0 days in February compared to January 2023. With the exception of the Port of Long Beach, port transit delays for West Coast ports in February 2023 are now higher than in December 2022 (see Figure 2). 

Figure 2: Monthly Average Transit Delays (in days) for the Top 10 Ports 

Note: Descartes’ definition of port transit 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.

LINGERING DISRUPTIONS HINDERING FLOW OF GOODS

Whether it’s the long arm of COVID impacting manufacturing supply chains, or labor shortages and uncertainty complicating transport logistics, importers and LSPs continue to face barriers to supply chain performance. COVID continues to impact available supply chain and logistics resources and operations globally. China, in particular, has seen widespread COVID infections after rolling back its zero-COVID restrictions. While the loosening of the country’s pandemic policies was intended to minimize the longer-term disruptions to society and business, the Chinese population has little-to-no immunity and the impact of COVID on manufacturing supply chains could continue for quite some time. 

On the labor front, members of the International Longshore and Warehouse Union (ILWU) have been working without a contract since July 1, 2022. While ILWU and the Pacific Maritime Association (PMA) recently announced that they “continue to negotiate and remain hopeful of reaching a deal soon,” negotiations for a new collective bargaining agreement—encompassing more than 22,000 dockworkers at 29 West Coast ports—has been dragging on since May 2022. 

Adding further complexity to the uncertain labor situation, California’s new labor legislation AB5 remains a thorn in the side of the trucking industry, with the risk of future AB5-related stoppages at California ports. This continuing labor uncertainty may be a significant reason why import volumes are not shifting back to major California ports, despite their reduction in transit delay times over the last year plus. 

Importers and LSPs would be wise to keep close tabs on the progress of the ILWU contract negotiations and monitor the impact of AB5 on owner-operators serving California ports for potential disruption or any degradation of container processing performance at the ports.

KEEPING AN EYE ON INFLATION INTO Q2

Companies are watching inflation rates closely as 2023 unfolds. Although the Consumer Price Index (CPI) rose 0.4% in February—slightly less than January’s 0.5% increase—inflation fell to 6% year-over-year, inching in the right direction towards the Fed’s 2% target. However, supercore inflation—representing the cost of services—rose by 0.2% last month and is up almost 7% from a year ago. For example, package delivery costs have risen 14.4% in the last year, as of February 2023.

According to the U.S. Energy Information Association, gasoline costs, a significant contributor to high inflation rates, decreased slightly in February to $3.34/gallon and somewhat stabilized. Diesel costs were also down slightly to $4.29/gallon, nearing February 2022 prices. Although stabilized, fuel costs are likely to remain elevated due to the disruption of global energy markets caused by the war in Ukraine and subsequent sanctions against Russia.

MANAGING SUPPLY CHAIN RISK

With the myriad of challenges impacting supply chain performance, importers and LSPs should stay proactive in their approach to designing and executing their logistics and supply chain strategy. In the short term, evaluating and understanding the impact of inflation and the Russia/Ukraine conflict on logistics costs and capacity constraints is critical for clearing a path ahead, while making sure key trading partners are not on sanctions lists mitigates potential penalties and further delays.

In the near term, importers and LSPs should focus on improving supply chain velocity, reliability, and predictability by looking for less congested transportation lanes, including smaller ports, and evaluating alternative transportation lanes into the U.S. To allay the risk of another logistics capacity crisis in the long term, companies may consider evaluating supplier and factory location density to minimize reliance on over-taxed trade lanes and regions of the globe that have the potential for conflict. 

FINAL THOUGHTS

The February U.S. container import data demonstrates some consistency with pre-pandemic import volume seasonality and offers a measure of relief from the logistical challenges that have plagued operations over the past few years. Several factors, however, point to continuing challenges for global supply chain performance. 

Despite declining import volumes, port transit times increased at West, East, and Gulf Coast ports, while unresolved labor-related issues may be keeping importers from moving volume back to the West Coast. Compounding factors, including the COVID-related impact on China’s manufacturing capacity, inflation, and the war in Ukraine continue to put pressure on supply chains and logistics operations. By closely monitoring these factors and taking steps to build long-term supply chain resilience, importers and LSPs can mitigate risk, improve supply chain reliability and velocity, and shore up the bottom line moving forward.

 

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February Decrease Keeps 2023 U.S. Container Imports on 2019 Path

Descartes Systems Group, the global leader in uniting logistics-intensive businesses in commerce, released its March Global Shipping Report for logistics and supply chain professionals. The report shows February 2023 U.S. container imports decreased significantly from January 2023 but remained aligned with pre-pandemic 2019 volumes. Despite the reduction, port transit delays increased for the top West, East and Gulf Coast ports. Chinese imports followed the downward trend along with the rest of the top countries of origin. COVID continues to be a factor from ports of origin and the West Coast labor situation has still not been sorted out. The February update of the logistics metrics Descartes is tracking shows some consistency with pre-pandemic import volume seasonality but continues to point to challenging global supply chain performance in 2023.

February 2023 U.S. container import volumes decreased 16.2% from January 2023 to 1,734,272 TEUs (see Figure 1). Versus February 2022, TEU volume was down 25.0%, but only 0.3% lower than pre-pandemic February 2019. Two points to consider with the February numbers: 1) February has 28 days versus 31 for January and 2) With the Chinese Lunar New Year holiday occurring in January 2023, its impact on container import volumes would be seen in late February and early March 2023.

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

Source: Descartes Datamyne™

“Examining imports from January and February in the previous six years, February 2023 volumes would have been expected to be significantly lower than January 2023 (see Figure 2),” said Chris Jones, EVP Industry at Descartes. “Declining container import volumes but rising port transit times demonstrate that, while 2023 volumes resemble 2019, global supply chain performance could remain uneven in 2023.”

Figure 2: January to February U.S. Container Import Volume Comparison

 

Source: Descartes Datamyne™

The March report is Descartes’ twentieth installment since beginning its analysis in August 2021. To read past reports, learn more about the key economic and logistics factors driving the global shipping crisis, and review strategies to help address it in the near-, short- and long-term, visit Descartes’ Global Shipping Resource Center.

About Descartes

Descartes (Nasdaq:DSGX) (TSX:DSG) is the global leader in providing on-demand, software-as-a-service solutions focused on improving the productivity, performance and security of logistics-intensive businesses. Customers use our modular, software-as-a-service solutions to route, schedule, track and measure delivery resources; plan, allocate and execute shipments; rate, audit and pay transportation invoices; access global trade data; file customs and security documents for imports and exports; and complete numerous other logistics processes by participating in the world’s largest, collaborative multimodal logistics community. Our headquarters are in Waterloo, Ontario, Canada and we have offices and partners around the world. Learn more at www.descartes.com, and connect with us on LinkedIn and Twitter.