Chart of the week: Inbound Ocean Shipments Index – Houston, Los Angeles, Savanne, New York, Oakland SONAR: IOSI.USHOU, IOSI.USLAX, IOSI.USSAV, IOSI.USNYC, IOSI.USOAK
The volume of imports continues to rise, causing bottlenecks in some of the largest ports in the United States. Importers are trying to find a more reliable entry point by booking freight in less congested areas. The Inbound Ocean Shipments Index measures freight booking activity for shipments entering the US at the port level based on estimated departure dates. The Port of Oakland has outpaced many of the country’s largest ports in terms of shipment growth since late September. There was a huge increase in bookings in Port Houston in mid-March. What will this mean for the already strained networks of the land transport providers and then for the tariffs?
Over the past year, increasing consumer demand for durable goods has been the driving force behind the economy and transportation, which has resulted in extreme growth in imports and domestic freight movements.
The ports of Los Angeles and Long Beach account for over 40% of the total ship import volume. Image – SONAR Tree Map of Import Market Share
The largest tracks for maritime imports come from China and end on the North American west coast, mainly in the ports of Los Angeles and Long Beach. As of last week, the ports in Southern California had handled over 40% of shipments to the United States
According to this week’s chart, bookings for cargo destined for alternate ports are growing faster than in LA and Long Beach. Given that these are percentages of much smaller starting numbers, the changes are significant against the backdrop of historical norms.
The port infrastructures are not only set up for a smaller amount of container volume, but also the providers of land transport such as drayage, rail and truck loading are being tested, as goods flow patterns disturb the network equilibrium.
For drayage providers, this is simply a plethora of inquiries that inevitably result in higher rates and keep them busier than normal. The amount of drayage capacity has a direct impact on the downstream warehouse and trucking providers and may limit or delay their exposure to increasing demand.
The rail network was already tested last fall, with large volumes moving from west to east, creating major imbalances. This new pattern can actually help balance the situation by distributing the cargo more evenly. The big risk to rail in the long run, if importers decide to move more cargo into east coast ports, is to eliminate the cost advantage rail has for long-haul movements over 800 miles. This could lead to lower volumes over time.
Truck loading networks take a long time to build efficiently, and drastic changes in domestic freight flows can affect available capacity. Some markets can benefit from additional volumes. Northern California, for example, is usually oversupplied compared to the rest of the country as more cargo enters than leaves the area. An increase in import volume could help balance the markets as outbound demand increases.
However, Savannah is on the other end of that spectrum. Savannah produces more cargo than it consumes thanks to the port and relatively low population density. Shippers will have trouble finding enough incoming loads to serve the market well. Hauliers will most likely reposition Florida and South Carolina trucks to meet growing demand.
While these are nearby, they also require “deadheading,” where they move the truck with no active paid load, thus increasing the outbound rate.
Imports have fueled domestic freight volumes in recent months. Graphic: SONAR – Outbound Tender Volume Index, Customs Shipments – USA
By and large, this also means that more cargo needs to be carried in the US in general. As mentioned earlier, there may be limitations for downstream providers that will buffer their experience to some extent, but that will result in a longer period of increased demand versus a high peak.
If you look at import shipments that process customs and tendering volumes for truck load shipments, an upper limit seems to have formed for the time being. This supports the belief that a spike is unlikely without a strong catalyst.
Even if imports grow and are distributed among different ports, the main risk for the transport markets is unbalancing certain areas.
About the chart of the week
The FreightWaves Chart of the Week is a selection of charts from SONAR that provides an interesting data point to describe the state of the freight markets. A chart is selected from thousands of potential maps on SONAR, which participants can use to visualize the freight market in real time. Every week a market expert publishes a graph with comments live on the front page. After that, the chart of the week is archived on FreightWaves.com for future reference.
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