U.S.-bound container shipments from Asia plunge as inflation bites

Ocean freight shipments from Asia to the U.S. declined sharply late last year as stubbornly high inflation sapped spending by American families on furniture and toys.

With retailers no longer stocking up inventories like they did during the height of the pandemic, shipping rates are sinking to three-year lows, along with the prices for new containers themselves.

Container ships brought a volume of goods totaling 1.31 million twenty-foot equivalent units (TEU) from Asia to the U.S. in December, down 23% from a year earlier, U.S. logistics researcher Descartes Datamyne reports. This marked the third straight month that the figure fell by about 20%.

Asia-to-U.S. freight dipped on the year in August for the first time in more than two years, and the decline has accelerated since. For all of 2022, container volume slid 4% to 19.64 million TEUs, the first annual decrease in three years.

Inflation has eroded consumer purchasing power, softening demand for household goods and slowing ocean shipping, said an official at a container ship company, echoing the sentiment among peers.

Furniture shipments started plummeting in the summer and logged a 28% drop on the year in December. Despite the holiday shopping season, toys tumbled about 50% for each of the last three months of 2022, with the quarterly total even falling below the 2019 level.

As a shortage of port workers caused logjams of ships through the first half of 2022, retailers rushed to bulk up inventories to keep plenty of products on hand. Such efforts subsided after supply chains showed signs of a turnaround later in the year.

Freight from China, a big exporter of consumer goods, fell about 30% on the year in each month from October to December, driving down the total. Demand for Chinese-made goods before the Lunar New Year holiday was weaker than usual as well.

Some Chinese factories are halting operations for the holiday longer than usual in response to slow orders from the U.S. and Europe, so normalization likely will take a long time, said an official at Ocean Network Express, a company owned by Japanese shippers K Line, Mitsui O.S.K. Lines and Nippon Yusen Kaisha (NYK Line). A recovery in freight is unlikely for February, industry insiders say.

“U.S. consumer spending is not showing negative growth, but while retailers are stuck with excess inventory, shipping demand is unlikely to achieve a full-fledged rebound,” according to the research group at NYK Line.

The shipping decline has pushed rates lower. Spot rates for Shanghai to West Coast ports sank to $1,378 per forty-foot equivalent unit during the week ending Jan. 13, the lowest since early March 2020, the Shanghai Shipping Exchange reports. Spot rates for the East Coast route fell to $2,825, a level not seen since early June 2020.

Shippers are reducing service to improve the supply-demand balance. Capacity at one container ship company has been cut by more than 30%, an official there said.

Smaller ocean shippers that started service from Asia to the U.S. and Europe after rates surged in 2020 have withdrawn from the routes because of falling prices, an industry insider said.

Slowing demand also is hitting prices for the containers. A new twenty-foot container cost shipping companies about $2,000 in December, the lowest since January 2020 and about half of the peak in June 2021.

“Shipping and leasing companies are no longer ordering new containers. With steel material costs also falling, container prices may tumble further to around $1,500,” predicts Harumi Nakao, managing director at EF International, a Japanese company that purchases, sells and leases containers.
Source: Nikkei