LONG BEACH, April 11 – Is the trucking industry heading for a downturn? The advanced data indicates quite the opposite. In fact, our experts suspect that the coming months could see a sharp uptick in containers arriving at US ports. When that happens it means more business for everyone, truckers included.
There is no doubt that events in China, such as a manufacturing recess in preparation of the winter Olympics and Covid-related restrictions, have impacted Trans-Pacific cargo volumes into North American West Coast ports. And now, with the annual Lunar New Year factory closings in Asia this month, there has been a drop in the production of goods for export to the United States. That’s normal and it’s already beginning to show in statistics, with the Port of Los Angeles reporting on April 8, slight downturns in import volumes for the weeks of April 3 to April 16.
But the National Retail Federation, which monitors monthly containerized imports at leading US ports, said the annual lull will give ports “an opportunity to reduce existing congestion.” In a word, that means there will be a continuous flow of backlogged boxes coming out of the ports for truckers to haul.
But don’t expect that lull to last too long, as the Port of Los Angeles sees an uptick in import boxes of 46% during the week of April 17 to April 23. Not least, their projected figure of 147,787 teu for the week represents an 8.39% rise over the same period in 2021. That’s an upward trend for truckers to note.
Of course, there are the current unexpected disruptions in Chinese exports due to new restrictions imposed by the government to stem the latest outbreak of Covid-19. As a result, output at some factories is restricted while others are being temporarily shuttered as many workers are kept at home.
Shipping and trucking companies in China are reported to be experiencing long delays and the volume of goods moving through the port of Shanghai has fallen around 40% compared with pre-lockdown levels, according to the European Union Chamber of Commerce in China, which represents firms at work in the country’s northeast.
Still, shipping executives report that the overall impact is being mitigated by the diversion of export cargo to the nearby port of Ningbo.
No one knows how long this apparent downturn will last, but as with the annual reduction due to the Lunar New Year, any extra lull will be offset by the current backlog of cargo sitting at US ports or on its way.
That observation is supported by retail consultant Ben Hackett who notes that “vessels remain at anchor awaiting berths on both coasts, with the Port of Los Angeles alone listing over 40 ships. The significance of this is that vessel arrivals over the next three to five months will come on top of already-waiting volume, thereby masking potential shifts in import patterns.”
Beyond that, according to Weston LaBar, Head of Strategy for Cargomatic, the expectation is that a “tsunami” of exports will be released once China weathers this latest round of Covid-19 restrictions.
“Talking with countless stakeholders doing business in China, they all talk about the tsunami of ships that are going to show up at the end of May or the beginning of June – once Chinese manufacturing starts operating back at normal production levels, and people get back to work and the ports start functioning at full bore,” he said.
Still, some predictions see the coming negotiations between US West Coast dockworkers and their employers as perhaps causing disruptions.
Some shippers fear slowdowns, lockdowns or even strikes at West Coast ports if negotiations begin to falter as the June 30 deadline approaches for a new contract between the International Longshore and Warehouse Union and their employers as represented by the Pacific Maritime Association.
“We know that in those years when we have the negotiations, both sides sit down and try to get a deal early, but that rarely happens,” Jeremy Nixon, Head of the ONE Shipping Alliance told a recent conference. “And so, the concern obviously for all of us in the supply chain is that those negotiations will take a long time and they could revert into lower productivity, and they could even revert into something more serious.”
That’s a matter of concern, but a concern that has gotten shippers frontloading as much cargo as possible to insure against any disruption that would prevent their goods from arriving on time. That frontloading just means more cargo for truck drivers, not less.
Still, just how likely are the labor negotiations to disrupt things?
Port of Los Angeles Executive Director Gene Seroka doubts that the labor talks will create any disruption to the flow of cargo coming through his port, the nation’s leading facility. “Those negotiations will go on, in many opinions, past the expiry date of June 30th, but that should not be of concern,” Mr. Seroka said. Workers, service providers, employer associations and companies they represent “will be moving more cargo than ever before in American history.”
Some have been looking at recent domestic truckload numbers as an ominous foreshadowing of a downturn in US domestic trucking. However, a more in-depth study shows that nationally the change is marginal and the dip in domestic truckload demand on the US West Coast, specifically in Southern California, has an obvious correlation with the chronicled manufacturing delays in China.
Domestic trucking has seen a spike in demand near Gulf and East Coast ports, who have seen additional volume due to concerns by importers regarding the ILWU contract negotiations. Also, other trucking verticals, such as drayage, intermodal, and local short-haul have continued to see high demand for capacity.
Making predictions is always a risky business but based on comprehensive data, more than just the domestic trucking spot market index, a downturn in the trucking industry appears unlikely in the foreseeable future. In fact, shippers waiting to lock-in reliable trucking capacity could be on the outside looking in and be hard-pressed to move goods as the year progresses.
