Journal of Commerce Economist Mario Moreno upgraded his forecast for the eastbound trans-Pacific lane to 3 percent growth to a total of 13.1 million TEUs. Better-than-expected traffic in the first quarter was the major driver in the upgrade — issued in the June report of Container Shipping Outlook — from the forecast of 2 percent growth made at the TPM conference in Long Beach in March. “China was the region’s best performer sending 4.9 percent more volume or nearly double the four-quarter moving average rate of growth to U.S. ports than in the same period last year,” he said. His forecast is based on the following assumptions:
- The housing market will remain in recovery mode, supported by affordable mortgage rates, and advances on the employment front. This is good for demand of imported furniture and other home goods. “With support from the accelerating U.S. housing market, furniture imports from the region should remain positive at least through 2013,” Moreno said. The report also underlined the continued diversion of furniture manufacturing to low-cost producers such as Vietnam, which is expected to limit future import growth of this commodity to single digits.
- Auto sales continue their recovery, resulting in a strong demand for imported auto parts. “This trade should continue to improve through 2013, with support from the increasingly competitive Japanese yen,” Moreno said.
- Near-shoring continues, adversely affecting demand for Asian goods. “Rapid wages increases in China have caused a narrowing of the wage gap between China and Mexico and other low-cost producers,” Moreno commented. “The industries most impacted by this trend are footwear, furniture, and toys.”
Factory wages in China have grown at a compound annual growth rate of 15 percent a year between 2000 and 2009. “This is adversely impacting the profitability of labor-intensive export industries, many of which had to shut down operations, move west or leave China completely,” Moreno said in a recent webcast.
In recent years, footwear factories in Vietnam have expanded at a decent pace. Yet some factory owners are hesitant in leaving China completely for Vietnam, given China’s far superior infrastructure and supply network. US container imports from Southeast Asia are forecast to grow by 7 percent this year, faster than the 2.3 percent growth expected from Northeast Asia.
Despite positive forecasts for the trade, US containerized imports from Asia will not surpass their 2007 peak until next year. A not-so-stellar economy and increasing near-shoring activity have contributed to a very slow recovery in the eastbound trans-Pacific lane. “China will see its strength in labor-intensive export manufacturing diminish at a slow but steady pace in the years to come mostly because of rising production costs,” Moreno said. “Instead, China will focus resources on high-value, capital-intensive goods exports.”
Improving conditions have also led shipping lines that carry containerized imports from Asia to announce plans to implement a peak-season surcharge of $400 per 40-foot container to all U.S. destinations effective Aug. 1. This follows an increase of as much as $400 per FEU to the U.S. West Coast and $600 per FEU to all other U.S. destinations implemented by some members of the Transpacific Stabilization Agreement on July 1.