US imports from Asia plunge in May after April dip

US imports from Asia plunge in May after April dip

IHS Markit’s GTA Forecasting predicts that growth in the eastbound trans-Pacific will return in 2021. Photo credit: Shutterstock.com.

A drop in US imports from Asia last month could be a signal that the relative leveling of volume in April was caused by temporary inventory restocking, rather than a sustained recovery of consumer demand.

US imports from Asia plunged 18.5 percent year over year in May, putting the trade on track to end the year with volumes down 7.9 percent from 2020, according to data from PIERS and GTA Forecasting, sister products of JOC.com within IHS Markit. That followed year-over-year declines of 1.7 percent in April, 18.3 percent in March, 11.5 percent in February, and 2.9 percent in January.

Non-vessel operating common carriers (NVOs) in late May told JOC.com the surge of imports the previous two weeks would likely be short-lived, with peaks and valleys in imports from Asia continuing throughout 2020. Carrier-announced blank sailings into August are a sign that imports could be muted this summer before picking up in August, the beginning of the peak-shipping season.

GTA Forecasting projected that US imports from Asia in 2020 will decline 7.6 percent from 2019, but rebound sharply in 2021 with an 8.3 percent increase. Imports from Asia in 2019 declined 4.7 percent from 2018, and this year are down 9.2 percent through May from the same period last year.

Global Port Tracker, which is published monthly by the National Retail Federation and Hackett Associates, on Monday forecasted a disappointing peak shipping season in the eastbound trans-Pacific trade. The report projected that containerized imports will decline 12.9 percent year over year in August, 11.3 percent in September, and 7.9 percent in October. Most merchandise imports must arrive in the US by early November in order to be on store shelves for the start of the holiday shopping season.

Trade war ravages imports from China

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In addition to the impact of COVID-19 on consumer demand, imports from Asia have been ravaged by the US-China trade war. Volumes of US imports from China plunged 18.3 percent year over year in May after declining 10.8 percent in April, 40.1 percent in March, 20.3 percent in February, and 9.5 percent in January, according to PIERS. 

The devastating impact of the trade war on US imports from China is evidenced by that country’s eroding share of US imports from Asia. China’s share declined to 55.7 percent in the first four months of 2020, down from a 67.8 percent market share in the same 2018 period, before the trade war began, according to PIERS. 

Although US retailers and manufacturers are shifting some of their sourcing to other countries in North and Southeast Asia, those countries cannot replace the loss of China cargo. US imports from China in May totaled 732,010 TEU, down from 895,646 TEU in May 2019 and 916,629 TEU in May 2018, according to PIERS.

Carriers have responded to the declining volumes in the eastbound trans-Pacific — and forecast for weak imports continuing through the summer — by blanking sailings. Carriers so far have announced 42 blank sailings from June 1 through Aug. 9. Carriers had blanked 117 sailings from Asia to North America from early February through May, according to Sea-Intelligence Maritime Consulting.

Carriers told JOC.com that with import volumes expected to remain negative in the coming months, their only solution for financial viability is to reduce their costs through blank sailings. NVOs contend that carriers have reduced capacity too aggressively, and this has resulted in a spike in spot rates in the eastbound trans-Pacific.

On June 5, the Shanghai-West Coast spot rate was $2,132 per FEU, up 48.2 percent from the same week last year, according to the Shanghai Containerized Freight Index, which is published under the JOC Shipping & Logistics Pricing Hub. The East Coast spot rate was $2,738 per FEU, up 9.4 percent from 2019.

Contact Bill Mongelluzzo at bill.mongelluzzo@ihsmarkit.com and follow him on Twitter: @billmongelluzzo.