Commentary: Steady As She Goes

Commentary: Steady As She Goes

It appears ports, carriers and retailers can breathe a sigh of relief. Peak-season 2012 in the eastbound Pacific will turn out to be just fine.

First, there should be no major disruptions in cargo flow. The Federal Mediation and Conciliation Service on Sept. 20 announced that the International Longshoremen’s Association and United States Maritime Alliance agreed to extend the ILA contract until Dec. 29. Because there will be no strike or employer lockout, many of the importers on the East Coast that had been considering diverting shipments to other coasts are free to route those shipments through East and Gulf Coast ports.

According to the Transpacific Stabilization Agreement, a discussion group of 15 carriers in the eastbound trans-Pacific trade, vessels calling at West Coast ports were operating at 95 to 99 percent capacity by mid-September because of normal seasonal trends and diversion of cargo from the East Coast. Vessel utilization rates will remain high well into October, and there could be some rolling of cargo, but cargo flow to all coasts should return to normal by the end of the month.

Imports during the peak season will be up compared to 2011. Journal of Commerce economist Mario Moreno told the South Carolina International Trade Conference on Sept. 18 that imports in the first half of 2012 increased only 2.4 percent compared to the same period last year. Imports, however, jumped 10 percent in July, possibly because of early shipping of holiday goods this year. Imports of consumer merchandise will be relatively strong for the rest of the year, with imports for 2012 up 4.6 percent compared to 2011, Moreno said.

The bounce in the second half of the year helped carriers to increase their freight rates. Unless rates collapse after October, carriers should return to profitability this year. The lines could not have afforded another year like 2011 when they collectively lost more than $6 billion in their global operations.

Moreno’s projection for imports in 2013 indicates the dark days of the 2008-09 recession have been put to rest. Containerized imports are projected to increase about 5.5 percent next year. The U.S. economy probably will not return to robust growth, however, because it will take consistent monthly job growth above 150,000 to sustain recovery in the housing market. Sustained growth in the housing market is crucial to a strong eastbound trade. Still, a 5.5 percent increase in imports in 2013 would finally take cargo volumes back to where they were in the peak year of 2006.

Given the scenarios that could have developed this year, including a strike or lockout on the East Coast, port congestion on the West Coast or a sharp decline in trade because of lackluster economic growth in the U.S., Asia and Europe, peak-season 2012 should be viewed as the start of a period of slow but steady growth in the largest U.S. trade lane.

Contact Bill Mongelluzzo at Follow him on Twitter @billmongelluzzo.