In August 2023, U.S. container import volume increased slightly compared to July 2023, which is fairly consistent with the rise 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.
U.S. container imports flatten.
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.
Examining the increase in import volumes from July to August in the previous six years, apart from pandemic-driven 2020 and 2021 which were anomalies, August 2023 volumes show a very modest increase from July of the same year.
For the top 10 ports, overall U.S. container import volume in August 2023 was up slightly to 7,851 TEUs versus July (see Figure 3) with seven of the ten ports reporting decreases. The West Coast Ports of Los Angeles (47,095 TEUs) and Long Beach (35,996 TEUs) showed the greatest overall container volume increases, but the Ports of New York/New Jersey (-24,089) and Savannah (-26,020) had the greatest decreases.
Chinese imports in August 2023 increased by 1.5% over July 2023 to 831,912 TEUs, but they were still down 17.1% from the August 2022 high (see Figure 4). China represented 37.9% of the total U.S. container imports in August, a slight increase of 0.4% from July, but still down 3.6% from the high of 41.5% in February 2022.
For the top 10 countries of origin (CoO), U.S. container import volume in August 2023 increased 1.3% (20,657 TEUs) from the previous month, with China having the greatest volume increase (12,075 TEUs) and South Korea (-14,909 TEUs) having the greatest volume decrease.
Top East Coast Ports’ market share regresses based upon performance of the Ports of Los Angeles and Long Beach.
In August 2023, the volume share at top West Coast ports increased based upon the significant volume increase at the Ports of Los Angeles and Long Beach. Comparing the top five West Coast ports to the top five East and Gulf Coast ports in August 2023 versus July 2023 shows that, of the total import container volume, top West Coast ports increased to 41.9% (up 3.6%) and top East and Gulf Coast ports decreased to 43.1% (down 3.3%). Compared to smaller ports, the top 10 ports’ share in August 2023 increased slightly to 85.1%, up 0.4% versus July 2023.
August port transit delays slightly better than July’s performance.
In August 2023, overall port transit delays were slightly lower than for July 2023 (see Figure 7) and one of the lowest months since Descartes started tracking them. Only the Ports of Los Angeles (0.8 days) and Houston (0.3 days) had increases in August 2023 compared to July. The greatest decrease was the Port of Oakland (1.2 days).
U.S. West Coast labor agreement is ratified and while the drought in Panama continues to get attention, it is not impacting U.S. container import volumes.
At the end of August, the International Longshore and Warehouse Union (ILWU) ratified the tentative agreement that ends July 1, 2028. This could mean the return of more of the 1M TEUs that left West Coast ports during the pandemic.
The drought in Panama is receiving significant attention in the press, but ultimately does not appear to be impacting U.S. container imports (see Figure 8) currently. Volumes at Gulf Coast ports are following overall U.S. container import volumes and were at their highest for the year in July and August 2023. Additionally, there has been no meaningful increase in transit time delays in the region; in fact, August transit time delays were among the lowest of the year for Gulf Coast ports.
According to the U.S. Energy Information Administration, gasoline costs, a significant contributor to high inflation rates, increased to $3.81/gallon in August 2023, up $0.06/gallon from August 2022. Diesel costs also increased to $4.49/gallon in August but are down $0.59/gallon from August 2022. Both increases reflect summer trends and are likely to remain elevated for the foreseeable future given the disruption of global energy markets due to the war in Ukraine and subsequent sanctions on Russia.
Managing supply chain risk: what to watch in 2023.
U.S. container import volume increased in August, continuing to track 2019 numbers, and there are positive signs that point to less supply chain turbulence. Here’s what Descartes will be watching to see if global supply chain performance will continue to improve:
- Monthly TEU volumes between 2.4M and 2.6M. This level will continue to stress ports and inland logistics until infrastructure can be enhanced. August U.S. container import volumes are up to 2.2M TEUs, but significantly below this range.
- Port transit wait times. If they decrease, it’s an indication of improved global supply chain efficiencies capabilities or that the demand for goods and logistics services is declining. August port wait times across all major ports remained consistent with decreased wait times in July.
- 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. A new variant of COVID is causing infection rates to rise. They have not yet impacted supply chains and logistics resources but need to be watched throughout the remainder of the year.
- ILWU contract negotiations. The ILWU contract has expired, but to date there hasn’t been an impact on U.S. West Coast port operations; however, California AB5 has the potential to cause more disruptions to California port operations. The ILWU contract has been ratified and will be removed from this report in October.
- 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. The latest Consumer Price Index report available (July 2023) shows a slight increase in inflation to 3.2% and remains higher than the U.S.
- Federal Reserve’s target of 2%. Diesel and gas prices have increased, and both remain elevated because of the Russia/Ukraine conflict.
Consider recommendations to help minimize global shipping challenges.
August 2023 U.S. container import volumes were up versus July 2023 and still close to pre-pandemic 2019 numbers. Port transit times in August remained at lower levels. The U.S. West Coast labor situation is now resolved, which could facilitate a return of some of the volume that moved to Gulf and East Coast ports though the continuing drought situation in Panama may hasten that return. This data reaffirms that the pressure on supply chains and logistics operations is continuing 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 global shipping. We’re staying the course with our current perspectives and recommendations:
- 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.
- Continue to look at alternate transportation lanes, including smaller ports, to improve supply chain velocity and resiliency. 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.
- 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.
Source: The Descartes Systems Group