Retailers Expect January US Container Volumes to Stay Elevated

As the new year begins, retailers are anticipating that container volumes at U.S. ports will remain elevated in January, driven by a combination of factors that have contributed to the sustained high volumes in recent months. According to the National Retail Federation (NRF) and Hackett Associates, American ports handled 2.17 million twenty-foot equivalent units (TEUs) in November, up 14.7% year over year. The NRF projects December volume at 2.24 million TEUs, up 19.2% year over year, pushing full-year totals to 25.6 million TEUs, 15.2% ahead of 2023.

Several factors contribute to the sustained high container volumes in January:

1. Retailers' anticipation of potential labor issues and tariffs: Retailers have been stockpiling imports in an effort to avoid the whipsawing of simmering labor issues and threats of fresh tariffs in the coming year. This is evident in the statement by Jonathan Gold, NRF's vice president for supply chain and customs policy, who said, "The surge in imports has also been driven by President-elect Trump’s plan to increase tariffs because retailers want to avoid higher costs that will eventually be paid by consumers."
2. Early import of spring merchandise: Retailers were already bringing in spring merchandise early to ensure that they would be well-stocked to serve their customers in case of another disruption. This is mentioned in the NRF's Global Port Tracker report, which states that the surge in imports was driven by retailers' desire to be well-stocked for the spring season.
3. Avoidance of potential disruptions: The agreement between port employers and union longshoremen on a new six-year pact, which averted a potential strike, did not come until the last minute. As a result, retailers had already front-loaded cargo in anticipation of delays, giving a boost to imports in December and early January. This is highlighted in the statement by Ben Hackett, founder of Hackett Associates, who said, "Importers had already front-loaded cargo in anticipation of delays, giving a boost to imports in December and early January."
4. Strong consumer spending: Despite significant inflationary pressures, U.S. consumer spending has shown remarkable resilience, underpinned by solid increases in personal consumption expenditures. This has led to a sustained demand for goods, which retailers have been proactive in meeting by increasing their inventory levels. This is evident in the data from the U.S. Department of Commerce, which shows a steady upward trend in personal consumption expenditures (PCE).

These factors, combined with the ongoing supply chain challenges, have contributed to the sustained high container volumes in January.

Retailers are planning to manage inventory levels amidst elevated volumes by strategically frontloading cargo and stockpiling imports in anticipation of potential disruptions and tariff changes. According to the National Retail Federation (NRF), retailers are bringing in spring merchandise early to ensure they are well-stocked in case of another disruption, such as a potential strike or increased tariffs. This strategy has led to a surge in imports, with American ports handling 2.17 million twenty-foot equivalent units (TEUs) in November, up 14.7% year over year. The NRF projects December volume at 2.24 million TEUs, up 19.2% year over year, and pushing full-year totals to 25.6 million TEUs, 15.2% ahead of 2023. This frontloading strategy allows retailers to mitigate the impact of potential disruptions and ensure they have adequate inventory to meet consumer demand.

Continued high volumes of container flows through U.S. ports could have significant impacts on port congestion and transit times. High volumes can lead to congestion at ports, as seen in recent years, resulting from a combination of factors, including increased demand, labor issues, and infrastructure limitations. For instance, in 2021, the Port of Los Angeles and Long Beach experienced severe congestion, with ships waiting for days to unload their cargo. High volumes can also lead to longer transit times, as ports and terminals struggle to keep up with the influx of containers. This can result in delays for both imports and exports. For example, in 2021, the average transit time for containers from Asia to the U.S. West Coast was around 70 days, up from the typical 30-40 days. High volumes can push port capacity to its limits, leading to further congestion and delays. For instance, in 2021, the Port of Savannah reached its capacity limits, leading to congestion and delays. Prolonged congestion and delays can have significant economic impacts, including increased shipping costs, reduced productivity, and potential job losses. For example, in 2021, the U.S. Chamber of Commerce estimated that port congestion cost the U.S. economy $23 billion.

In conclusion, retailers expect January US container volumes to stay elevated due to a combination of factors, including retailers' anticipation of potential labor issues and tariffs, early import of spring merchandise, avoidance of potential disruptions, and strong consumer spending. Retailers are planning to manage inventory levels amidst elevated volumes by strategically frontloading cargo and stockpiling imports. However, continued high volumes could have significant impacts on port congestion and transit times, leading to potential economic consequences.