Editor Dana L. Brundage and Senior Editor Joseph Bonney discuss the reasons for a possible early peak shipping season this year, how this may affect the industry and what is forecast for 2011 and beyond in this podcast.
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Q: Joe, you wrote the cover story to this week’s The Journal of Commerce, a piece called “Is Container Shipping past Its Peak?” In it, you write that several factors point to the possibility that the peak shipping season may be behind us, as opposed to the traditional peak season time, which is late summer and early fall. What are some of the factors proving this to be the case?
A: The economists I spoke with noted several signs of weakness in consumer spending, which is a main pillar of containerized imports. Many consumers are unemployed or worried about jobs. Credit has tightened for consumers and businesses. Housing markets are weak, and various indices during the last month have suggested a slowing of manufacturing growth in many countries, including China. Also the restocking of inventory that that boosted volumes earlier this year seems to have largely run its course.
Besides general economic conditions, a couple of other things could account for what appears to be an early peak season this year. There were shortages of containers and vessel space last spring. Some shipments may have been pushed back into May and June. Meanwhile some shippers seem to have decided to avoid a possible repeat of those problems by booking their shipments for the holiday peak season early and not waiting until the usual peak season of August through October. PIERS Global Intelligence Solutions, which is the sister company of Journal of Commerce estimates that the third quarter – July through September – will still be the highest volume quarter for imports, but by a very narrow margin. Second-quarter volumes will be nearly as high at the third quarter, which is unusual.
Q: Are there any specific trade or economic numbers that suggest slower growth in container volumes?
A: One intriguing number from PIERS data is exports of paper and paperboard. This includes waste cardboard that is sent to China for recycling into packaging for goods shipped back to the U.S. According to PIERS numbers, U.S. exports of this commodity to China were down 20 percent in the first quarter and 16 percent in May or June. Some of that could be due to changes in sourcing, for example, buying from Europe instead of the U.S., but it also could be an early indicator that manufacturers expect U.S. demand for import goods to be weak.
Something else to watch is housing. When people buy houses, they tend to buy furniture and home furnishings. Imports of both of those cargo commodities were up sharply early this year. The chief economist at PIERS, Mario Moreno, thinks this was connected with the home-buying incentives that expired mid-year, and he suspects that imports of furniture and home furnishings will weaken now that the incentives have ended.
Q: How should we view the expected slowdown in growth rates? What does this mean for the industry?
A: It depends on whether you see the glass as half full or half empty. It’s important to remember that this year’s volumes – for imports and exports – will be up substantially from last year’s numbers, which were especially weak because of the recession. It’s just the growth rate that’s expected to slow. Part of that is due to tougher comparisons with the last quarter of 2009, when the economy began to emerge from recession and cargo volumes started to pick back up. PIERS projects increases of 10.3 percent for imports and 5.2 percent in exports for the full year.
Q: What kind of volumes are forecast for 2011?
A: PIERS’ latest forecast are for 4 percent growth in imports and 3.6 percent in exports. That reflects both the tougher comparisons with this year’s numbers and the uncertainty surrounding the economy. For 2012, PIERS looks for a return to higher growth and that will depend on the economy and largely on consumers.