Focus | us import demand is falling cliff type?!The real situation and the reason is like this

 On June 7, Freightwaves published a signed article by Henry Byers, which analyzes the multiple reasons for the decline in US import demand, which is worth judging by import and export companies. Reflex Reflectors, Terminal Block Connectors

 and 4 pin din connector should be noted.

The latest shipping container booking data show that despite the strong 2022 levels in the first five months of 2022.As capacity across the Pacific remains relatively stable, Freightos (Editor's note: Global freight booking and payment platforms) showed spot container prices, from China to the west coast, fell 38 percent month-on-month to $9,630.

While freight forwarding will enjoy expanding shipping profits, American trucking companies and intermodal suppliers may begin to see a drop in shipments.

Consumer buying patterns are rapidly normalizing to pre-pandemic levels, while U. S. retailers are being plagued by too much inventory.Target shares fell Tuesday morning after company executives said they would offer discounts, cancel purchase orders and act quickly to get rid of excess inventory.

This has also led to a 36 per cent drop in US container imports from all other countries, either year on year, or back to the summer level of 2020 levels.So what caused the sudden drop in container imports?The following concurrent factors are together to explain the sudden decline in numbers.

The most immediate cause is the backlog of US stocks.This is due to companies trying to fill most of the inventory that ran out in 2021, while also wanting to keep enough stock to cope with possible further logistics disruptions.These concerns have been exacerbated by successive rounds of lockdowns, but geopolitical risks seemed only escalating in the wake of the conflict more than 100 days ago; companies decided, for better or worse than face the risk of a sudden surge in consumer demand and goods abroad.

So if the consumer trend is now moving from goods to services, these goods production companies could be stuck in stocking up too much or on the wrong goods to secure sales.The accumulation of inventory will inevitably lead to a slowdown in new import orders, thus adding to the disruption we see on the demand for U. S. container imports.Just on Tuesday, Target announced an "aggressive" inventory reduction program focused on canceling orders and price promotions.

Above, showing rising inventories, and below, showing falling imports, retailers are in turn reducing the speed of their networks after the last freight surge hit the U. S. coast.

Consumers are being crushed

As inflation continues and prices become more expensive, consumers seem to get worse.Just this week, the AAA (editor's note: American Automobile Association, AAA) reported a new high of $4.51 a gallon.

Some economists speculate that we could experience a "peak in inflation" as the Fed begins to raise interest rates and shrink its balance sheet.However, even if inflationary pressures begin to ease, consumers may still be overly affected by higher interest rates due to the use of credit, which could further worsen demand and discretionary spending.
Credit card consumption has accelerated as the personal savings rate continues to fall and moves toward the lowest interest rate (the final reading is 4.4) since the big financial crisis (4.5 in August 2009).Here are two ways to interpret very low savings rates: either consumers are very confident and willing to spend money, or they spend every dollar they have to make ends meet with high inflation.—— It's hard to imagine consumer spending growing at this point.

Unfortunately, energy and food inflation does not know or care about how American consumer wallets are —— how inflation in these industries is caused by supply shocks, not by demand stimulus.Another point to keep in mind is that the growth rate of producer prices has always outpaced consumer prices, so some producers may still be hit by rising costs, but they have not yet passed this on to consumers.

So while the total outstanding revolving credit has just reached pre-pandemic levels, it is accelerating, and if prices continue to rise, it is reasonable to expect the outstanding revolving credit to rise, too.

At first glance, the retail table (the chart below) may conclude that retail sales are growing, but keep in mind that this is measured in nominal dollars, not adjusted for inflation, and represents higher selling prices of goods- -not the economic strength or resilience of consumers.Commodity production companies are not alone, and services and tech companies will also face pressure in the coming months, and selling stocks could lead to layoffs.

We see more and more signs that further US consumer demand is being damaged and the number of imported containers will fall further to near 2019 levels, so the Sino-US trade lines that concentrate most of the trade volume are worth studying.

Looking at the total throughput of all ports from China to the U. S., we can see traffic declining from the "peak season peak" in September 2021 to Tuesday (now down 51% from the peak).Although historically (before the trade war / outbreak), in late march to early May is the trade route volume is relatively weak period, but should also should realize that the Chinese government in Shanghai and other important manufacturing area (especially around Beijing and near the main port in Tianjin) of epidemic prevention and control and blockade measures also intensified the traffic volume decline.

Despite the blockade, the drop in traffic on the main trade route seems inevitable in 2022, as huge volumes between China and China are at unprecedented and unsustainable levels in 2021.Now, with China reopening, some industry observers have called for a "surge in containers," but it seems that demand disruption has greatly affected the trade corridor.

        Never before, a "container surge"

Most of the expected "container surge" from Shanghai (considered a backlog during the blockade) seem to have left the Ningbo port.Due to inland restrictions (i. e., road closures), access to the port was largely blocked, and shippers quickly rearranged transportation through the alternate major port closest to the port.The decline in new bookings (and freight volume) since the Shanghai blockade in late March has been offset by a surge in shipments diverted from Ningbo.Because shippers rush to get the goods out, this also brings booking delivery times to the lowest level on record.

Despite the reopening of Shanghai, the total number of containers from China to the United States continues to decline, and easing the new coronavirus control measures alone is unlikely to reverse it.As for the latest data, if this is the "container surge" from Shanghai to US ports when it reopened last Wednesday, this is almost insignificant compared to what we have seen from Shanghai to the US in the past 18-22 months.This "surge" can easily change in our booking data in the coming weeks, and if demand is suppressed, it will undoubtedly be reflected in it, but as of last Tuesday, it has not been implemented in any obvious way.

The steady decline in traffic volume from China to the United States has also brought huge downward pressure on spot freight rates from the demand level.As capacity remained relatively stable in the first weeks after the blockade (after March 28), traffic fell in the spot prices of China / East Asia-East-West coastline of the Freightos Baltic freight index (41% per FEU month on month to $9,630 per FEU, and 36% to $11,907 per F E U).For shippers who struggle with record freight rates in 2021, we should also remember that these spot prices are rising annually (73% on the West Coast and 59% on the East Coast).

If bookings continue to weaken in June, we expect further spot rates on the trade route to fall, but shipping companies may work harder than ever to try to protect their record earnings.They have already cut capacity on major trade routes by canceling routes and reducing ships, but if the decline in bookings accelerates in the coming weeks, we may see that the maritime alliance will be tested by unprecedented strength and control.

If freight rates start to fall rapidly, it is reasonable to suspect that shipping companies that have not yet tied most of their business to long-term contracts will significantly slash their prices in order to compete in the spot market.

Interestingly, the last port labor talks in the Port of Long Beach in Los Angeles in 2014-2015 caused a supply chain disruption (which increased US inventories), causing a similar situation.This may not sound realistic after a year of record volume, but a substantial weakening of spot rates will most likely lead to a reshuffling and / or restructuring of the current maritime alliance.


Post time: Jun-23-2022