Inbound cargo slump puts squeeze on US box supply
08 Mar 2009
Source:Lloydlist

THE container equipment shortages that threatened US exports last year have resurfaced, though for very different reasons, writes Janet Porter in Los Angeles.

Exporters are complaining there are not enough containers in parts of the country to meet their requirements, but this time it is not because of a sudden upsurge in overseas sales.

Instead, it is the collapse in inbound volumes that has left insufficient boxes to handle outbound cargoes in some areas.

US exports enjoyed a short-lived resurgence last year as the weak dollar lifted overseas demand. But as the bulk trades soared, many US shippers such as farmers began to containerise their produce, only to leave ocean carriers struggling to reposition equipment to the Mid-West and other regions where there had never been much need for containers in the past.

This time, the shortages reflect a precipitous collapse in trade that has left many containers being stored at ports or on sites close to the coast rather than inland.

Inbound US container volumes plummeted in January, with most ports on the west coast experiencing traffic declines of around 25%. Anecdotal reports indicate the February numbers were just as bad.

The sudden fall-off has triggered a round of price cuts along the supply chain, with lines that have seen ocean freight rates plunge demanding lower charges from terminal operators, which in turn are telling port authorities to reduce their fees. "Everyone's at it," one senior port official told Lloyd's List.

US exporters have the added pressure of knowing everything they produce could be sourced elsewhere, and are now being hit by the double whammy of a stronger dollar and weak overseas markets.

US containerised exports are forecast to fall 9.4% this year after growing 6.5% in 2008, according to Paul Bingham, managing director, global trade and transportation, at HIS Global Insight. A further small drop of 1.1% is projected for 2010, he told the Trans-Pacific Maritime Conference this week.

The slide for 2009 is not quite as bad as the 12% fall forecast for imports.

US exports were hit suddenly late last year. CMA CGM (America)'s Todd Rives told delegates the line witnessed a 30% drop in outbound liftings between the third and fourth quarters. Until then, 2008 was turning into a record year for US containerised exports, with net growth over 2007 of 10% because of the surge in the earlier months.

The bulk of US outbound cargoes consists of low-value commodities such as wastepaper, scrap metal and lumber, which are highly price-sensitive, with buyers shifting sourcing patterns in response to currency movements.

Mr Rives, export trades and line management vice-president at CMA CGM (America), acknowledged that equipment shortages were another problem for exporters, although the biggest issue for ocean carriers is that of phantom bookings by shippers

US Shippers Association project director John Chinn also drew attention to the equipment shortages. "If the equipment is not there, the cargo cannot move," he said,

But in a snap poll of delegates, 50% said the most serious constraint on exports was the weakness of foreign markets, with just 27% citing equipment shortages as their main concern. Another 11% said freight rates were a negative factor.