Despite Economic Worries, More Containers Flow From China To US

• China’s container freight to the United States reaches the highest volume since May 2022, defying economic concerns.
• The surge, driven by pre-Chinese New Year activity, raises questions amid China’s uncertain macroeconomic landscape.

Pre-Chinese New Year Surge and Beyond

Part of the surge in shipments is due to the traditional pre-Chinese New Year surge, a period when factories on China’s coast move a flurry of goods to the port before workers depart for a long holiday. However, this year’s peak surpasses 2023’s anemic Chinese New Year season, with volumes steadily growing throughout the year.

Container Volumes Amid Economic Uncertainty

Container volumes from China to the United States are steadily growing, raising questions given the uncertain macroeconomic situation in China. The manufacturing Purchasing Managers’ Index in China contracted for the fourth consecutive month, and the country faces challenges like the liquidation of Evergrande and a deepening stock market rout.

U.S. Importers Driving the Surge

The volume isn’t being pushed out of China solely by a burgeoning manufacturing sector. Instead, it appears to be pulled out by U.S. importers who have burned off inventory and are preparing to face higher-than-expected retail sales. U.S. inventory-to-sales ratios fell to 1.37 months in November 2023, well below pre-pandemic baselines.

Prospects for U.S. Ports in 2024

February and March are expected to be relatively strong months for U.S. ports, especially on the West Coast. When inventories are low and economic growth is strong, transportation providers find themselves in a more favorable business environment. Retailers and manufacturers need to move higher volumes of goods, tightening transportation capacity and raising rates.

Global Factors Impacting Container Shipping

Houthi terrorist attacks in the Red Sea have led to diverting shipping from the Suez Canal around the Cape of Good Hope, removing containership capacity from the market. This coincides with higher volumes out of China, contributing to eastbound spot rates on the trans-Pacific rising to more than $4,500 per forty-foot equivalent unit on most lanes from China to the West Coast.

Industry Insights from C.H. Robinson

In C.H. Robinson’s fourth-quarter earnings call on Jan. 31, CEO Dave Bozeman commented on the crisis’ impact on global supply chains and container rates. He highlighted challenges like ongoing conflict in the Red Sea, low water levels in the Panama Canal, and transit interruptions affecting global ocean capacity. The strain on capacity and elevated spot rates is expected to continue through at least the Chinese New Year.

Port of Los Angeles Volume Statistics

According to the Port of Los Angeles’ PortOptimizer, Week 6 TEU volumes were up 38.6% compared to the same week in 2023 (105,076 TEUs vs. 75,801 TEUs). In other words, volumes are already elevated compared to last year, and there’s reason to believe that even more is on the way.

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Source: Freight Waves

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