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Both Imports and Backlog are On the Rise

March 10, 2015
Import cargo volumes at the major retail container ports will rise significantly this month thanks to the conclusion of the West Coast ports dispute.

Import cargo volumes at the nation’s major retail container ports are expected to rise an unusually high 16.9% this month over the same time last year as West Coast ports begin to dig out from a backlog of cargo that built up during just-concluded contract negotiations with dockworkers, according to the Global Port Tracker report compiled by the National Retail Federation and consulting firm Hackett Associates.

“The contract talks are over, but the tentative agreement still has to be ratified and it’s going to take months to get back to normal on the West Coast,” says Jonathan Gold, NRF’s vice president for supply chain and customs policy. “Retailers’ immediate priority is to make sure spring merchandise reaches store shelves in time. Going forward, we want labor, management and Washington to work together to see that we never again have a situation like what we went through these past several months.”

Following negotiations that began last spring, the contract between the Pacific Maritime Association and the International Longshore and Warehouse Union expired on July 1, 2014. Despite ongoing talks, the lack of a contract and other operational issues led to crisis-level congestion at the ports, and retailers and other businesses asked President Obama in December to encourage the use of a federal mediator. A mediator joined the talks in January 2015 but a tentative agreement was not reached until February 20, after Labor Secretary Tom Perez sat down to personally broker a deal.

Ports covered by Global Port Tracker handled 1.24 million twenty-foot equivalent units (TEUs) in January, the latest month for which after-the-fact numbers are available. That was down 13.4% from December following the end of the holiday season and down 9.5% from January 2014. One TEU is one 20-foot-long cargo container or its equivalent.

February was estimated at 1.27 million TEUs, up 2.3% from 2014. March is forecast at 1.52 million TEUs as spring merchandise arrives, up 16.9% from last year. The March number is high both because of the backlog of ships at anchor waiting to be unloaded and because the annual Lunar New Year shutdown of Chinese factories was later this year, delaying some February cargo into March. April is forecast at 1.51 million TEUs, up 5.2%; May at 1.57 million TEUs, up 6.1%; June also at 1.57 million TEUs, up 6%, and July at 1.6 million TEUs, up 6.7%.

The first half of 2015 is forecast at 8.7 million TEUs, an increase of 4.5% over the same period last year.

Congestion at West Coast ports has prompted many importers to shift their cargo elsewhere, prompting speculation on how long the shift might last. West Coast ports handled 55% of cargo this January, down from 64% during the same month in 2014, while East Coast ports handled 45%, up from 36%.

“Importers and exporters are reviewing their supply chain plans for the future, and not necessarily in favor of the West Coast,” notes Ben Hackett, founder of Hackett Associates. “Looking on the practical side, a number of factors favor a return to the West Coast.”

Hackett says sending ships from Asia to the East Coast is more expensive than the West Coast, takes longer, and results in higher expenses to move the cargo to Midwest distribution centers by rail. In addition, importers have significant investments in West Coast DCs that would not easily be abandoned.