October Container Volume Expected to Decline More Than 18% From Year Ago at U.S. Ports

This story appears in the Aug. 31 print edition of Transport Topics.

October container volume at U.S. ports is expected to drop more than 18% from the same month last year — and down more than 25% from the record-making peak season of October 2006, economic forecasters said.

The anemic peak shipping season that’s expected will hit port truckers especially hard, one report said.

The peak shipping season — beginning with late summer back-to-school spending and stretching to early December holiday shopping sprees — traditionally has provided a hefty boost to the bottom lines of both transportation and retail.

But after a feeble 2008 peak season, the economic indicators continue to suggest that freight volume, especially imports, won’t improve much in the third and fourth quarters of 2009, according to the monthly trade logistics and intermodal outlook provided by Port Tracker.

“When people say there’s no peak this year, that’s not really true — if you compare it to the winter,” said Paul Bingham, an economist with IHS Global Insight, which produces Port Tracker along with the National Retail Federation. “There is a peak, but it’s just that the volumes we’re going to see are down tremendously from where we were two years ago.”

Typically, October is the month that produces the highest container volume, while February provides the lowest, Bingham said.

While August is predicted to be up 3.2% over July, it’s expected to be down more than 20% compared with August 2008, Port Tracker said.

“The low traffic continues to affect port truckers who have excess capacity and little ability to increase their incomes,” the August 2009 Port Tracker report said. “The recent increase in diesel prices is cause for concern, although fuel prices remain much lower than last summer.”

Art Wong, a spokesman for the Port of Long Beach, said it was difficult to say when things might return to normal: “It’s hard to say if the weak peak shipping season is a thing of the past.”

Together, the Ports of Long Beach and Los Angeles handle more than 40% of all U.S. container traffic.

“The peak shipping season comes because of a surge in Christmas spending,” Wong told Transport Topics. “But for the last several years, too many people have been losing their homes and jobs for much of a Christmas celebration.”

“To date this year, we have not seen any semblance of a peak season,” said Arley Baker, a spokesman for the Port of Los Angeles.

“We don’t see any significant volume gains until 2010 and even then, very moderate,” Baker said. “We just hope that the fourth quarter narrows our declining trend.”

Baker said the Port of Los Angeles is projecting its revenues will decline by 20% to 25% over the next year.

Long Beach’s Bingham said there were no indications that peak season is going away, but in future years, it is expected to start sooner. Since the West Coast port employment shutdown in 2004, Bingham said, retail managers have been trying to “spread out their imports, bringing them in a little earlier in the year.”

“Folks are trying to better organize their supply chain so they don’t get that mad rush in September and October,” said Jonathan Gold, vice president, supply chain and customs policy for the National Retail Federation.

Despite the gloomy forecast, the Intermodal Association of North America reported domestic containers were up 0.9% in the second quarter.

“But domestic container strength was once again not enough to offset the sharp contraction in international volume,” said IANA’s second-quarter report.

Bingham said the recession is tempering spending by consumers, but it’s not going to “turn them into the Depression generation.”

“I wouldn’t count out the U.S. consumer,” he said.

However, even when consumers gain confidence, they still will face financial constraints.

Bingham said lenders are now more cautious about extending credit, and with sinking housing prices, home equity loans will be tougher to obtain.

“As we’re looking at the current state of the economy, retailers are still being cautious with their ordering, looking at the holiday season,” Gold said. “So we’re expecting another slow holiday season — all the way through the end of the year.”

The bad economy makes it tougher for retailers to balance having too much on the store shelves with not having enough, Gold said. They’re keeping a close eye on consumer spending trends.

“Right now, consumer spending is down significantly,” Gold said. “So retailers don’t want to get stuck with excess inventory that they’re going to have to sell off at a discounted price.”