Shipping analysts said that if this year's shipping season and the U. S.-West labor negotiations and the Panama Canal drought continue to occur at the same time, the trans-Pacific route spot freight rates will further rise, and ease the shipping market capacity surplus.

Descartes data show that U.S. container imports increased in May from April 2023 due to increased imports from China and Vietnam, consistent with the seasonality of imports before the 2018-2019 epidemic. Of particular concern is the increase in the time of ships in port and has returned to the level of early 2023. If the above situation persists, coupled with signs that this year's peak season is likely to follow traditional patterns, global supply chains may face more complex challenges.

U.S. import volume rises

According to Descartes data, in May 2023, U.S. container imports increased by 3.8 percent month-on-month from April to 2,097,313TEU (see Figure 1). Compared with May 2022, it is down 20.0 percent year-on-year, but up 0.5 percent from May 2019 before the outbreak.

Descartes data show that compared with the past six years of March to April import volume growth, April 2023 imports compared to March of the same year there is a representative growth (see Figure 2).

For the top 10 U.S. ports, total U.S. container imports increased by 68,742TEU in May 2023 from April (see Figure 3). The Port of Los Angeles saw the largest increase in total container throughput at 56,226TEU, and the Port of Tacoma saw the largest increase at 33.3 percent.

May 2023, U.S. container imports from China have increased for the second consecutive month, up 5.1 percent from April 2023 to 780684TEU, but still about 22.2 percent below the August 2022 high. (see Figure 4).

In May, imports from China accounted for 37.2 percent of total U.S. container imports, up 0.4 percent from April, but still down 4.3 percent from the February 2022 high of 41.5 percent.

Among the top 10 exporting countries, US container imports increased by 3.8 or 54423TEU in May 2023, with imports from China increasing by 37991TEU or 5.1, and Vietnam increasing by 13.6 or 20362TEU (see Figure 5). Japan recorded the largest decrease (-14.3 percent), mainly due to the Golden Week holiday in the first five days of May.

US-West Major Ports Market Share Continues to Grow

In May 2023, the US-West major port market share again increased, while the US-East and US-Gulf major port market share declined.

Compared with April 2023, the market share of the top five ports in the U.S. West increased to 41.5 percent (up 1.3 percent) in, while the market share of the top five ports in the U.S. East and U.S. Bay decreased to 42.8 percent (down 1.2 percent). Compared with smaller ports, the share of the top 10 ports stabilized at 84.3 percent in May 2023, essentially the same as in April 2023 (see Figure 6).

Port congestion could reverse and spread to major ports

Compared with April 2023 (see Figure 7), the overall port operation delay in May 2023 is much longer, and the overall delay in late 2022 and the first quarter of 2023 is similar.

US-West port labor talks slow

Just as the container market is rapidly normalizing and freight rates are still under pressure at a critical moment, the escalation of US-West port labor negotiations and the decline in the Panama Canal water level may lead to a new round of supply chain disruptions, which may lead to higher freight rates and ease the container industry. Some overcapacity issues.

Shipping analyst, consulting firm Vespucci Maritime founder Lars Jensen said: "this for importers and exporters is certainly a negative factor, but the liner company is actually not a bad thing."

While this is bad news for global supply chains, for liner companies facing overcapacity, it's an unexpected gift.

Xeneta chief analyst Peter Sand added: "For cargo owners, it is very bad. They should expect cargo transit times to increase and freight rates to soar, but this timing is perfect for liner companies."

Hapg-Lloyd chief executive Rolf Habben Jansen said this week: "I hope the labor negotiations will be concluded soon, because the peak season is approaching, if there is unrest will be detrimental to the interests of all parties."

The National Retail Federation (NRF) supply chain vice president Jonathan Gold said: "If the union and port management cannot reach an agreement, the terminal will not be able to operate efficiently, and retailers will have no choice but to continue to ship goods to the East and Gulf Coast ports."

Panama Canal water level drop to the United States East and the Gulf of the United States routes to bring pressure

At the same time, moving cargo to ports along the East and Gulf of America is problematic, as Panama is experiencing its worst drought since 1950, causing canal-going vessels to be draught-restricted.

In the drought situation continues to worsen the background, the Panama Canal Authority (ACP) announced that it will further reduce the allowed through the ship's maximum draft.

According to the canal spokesman Octavio Colindres, starting from May 24, the new Panamax container ship is allowed to have a maximum draft of 44.5 feet (13.56 meters). And after May 30, the draft cap will again drop to 44 feet.

and before that, the draft limit for new Panamax container ships was 45 feet. During droughts in 2019 and 2016, the Panama Canal's draft was lowered to 43 feet. Some meteorologists predict that the situation of the Panama Canal this summer may be even more optimistic. Perhaps in August we will see the Panama Canal's draft cap again reduced to 43 feet.

this development will put pressure on the routes of the US East and the US Gulf. According to professionals, the draft restrictions on the Panama Canal may force a 10,000-TEU container ship to unload about 4,000 TEU before passing through the canal.

Lars Jensen said, "As we saw during the outbreak, this may bring additional profits to liner companies. We will have to wait and see. But the main positive impact may be that goods have to be transported over long distances, which will absorb part of the total capacity."

Peter Sand, principal analyst at Xeneta, said more than 1000 new ships will be delivered over the next five years. Their total capacity is equivalent to 14.6 per cent of the existing fleet. In 2023 and 2024 alone, more than 800 new container ships will enter the market. The global economic slowdown combined with a large number of new capacity will further increase the pressure on freight rates, but the above-mentioned US-West port labor negotiations and the Panama Canal drought may allow liner companies to get out of trouble.

US-West port labor talks could last long

analysts said it was hard to say how long the latest U. S.-West port labor talks would last. By July of this year, port workers had not reached a labor agreement for a year, so negotiations have now reached a critical point where all parties have been forced to make compromises to avoid strikes or lockouts.

Lars Jensen said: "People should not ignore the strength of the unions, although their negotiating position is weakened compared to a year ago, when they certainly missed a golden opportunity. They control all the Spanish-American ports, and if they launch a strike, goods cannot enter. That would be very painful."

Trans-Pacific spot freight rates rise?

if this year's peak shipping season coincided with the U. S.-West labor conflict and the drought in the Panama Canal, spot freight rates on the trans-Pacific route would rise further and alleviate the problem of excess capacity in the shipping market. However, on June 9, 2023, China's export container freight index CCFI was 921.48, down another 1.0 per cent from last week. Shanghai's export container freight index SCFI was 979.85, down 48.85 points, or 4.7 percent, taking all last week's gains back.

Source: Shipping Industry