Container imports and freight rates surged in July, signaling an earlier-than-usual peak season for the ocean shipping industry that handles about 80% of global trade.
July is expected to be the peak for U.S. retailers, who account for about half of that trade, and August is expected to be almost as robust, analysts said.
Companies that import toys, home goods and consumer electronics have brought forward holiday promotions to capture customers who are shopping earlier each season. “Retailers don’t want to be caught back-footed,” said Jonathan Gold, the National Retail Federation’s (NRF) vice president for supply chain and customs policy.
Many shippers expedited holiday goods orders, with some putting Christmas items on the water as early as May, said Peter Sand, chief analyst at pricing platform Xeneta.
The influx is not due to consumer spending, which has been tethered by persistent inflation and high interest rates, experts said. Rather, it is a precaution against a potential U.S. port strike and the late Nov. 28 date of Thanksgiving this year that crunches the peak shopping and delivery season running to Christmas Eve. In July, U.S. container imports notched the third-highest monthly volume on record with 2.6 million 20-foot equivalent units (TEUs), up 16.8% from the year earlier, in part due to record imports from China, according to supply chain software provider Descartes Systems Group. The NRF, which is chaired by the CEO of Walmart’s U.S. unit and includes the CEOs of Target, Macy’s and Saks on its executive committee, said it also expects strong August imports. Walmart, the nation’s largest container shipping importer, reports second-quarter earnings on Aug. 15.
Retailers are concerned about a possible Oct. 1 strike at seaports stretching from Maine to Texas after talks between the International Longshoremen’s Association and the United States Maritime Alliance stalled.
Non-contract spot rates for a container going from the Far East to the U.S. West Coast jumped 144% between the end of April and start of July, but have since fallen 17%, with similar trends seen in container routes to the U.S. East Coast and into North Europe and the Mediterranean, according to Xeneta.
“We should now see the spot market fall further, but the decline is unlikely to be as rapid as the rise, so it still going to be a painful end to the year for shippers,” Sand said.
TARIFF THREAT
The industrial sector has been a significant driver of U.S. container import growth in the first half of 2024, in part due to looming tariffs on exports from China and other countries. President Joe Biden’s administration levied new tariffs on numerous goods that will take effect later this year.
“The big tariff pull-through is EV batteries and solar cells,” said Jason Miller, professor of supply chain management at Michigan State University’s business school.
Biden has maintained tariffs put in place by his predecessor Donald Trump, who as the 2024 Republican nominee has threatened more and larger tariffs if he regains the White House. Despite that threat, the response from companies has so far been muted, Miller said. Global shipper Maersk said there could be some pulling forward of demand ahead of the U.S. election in November due to uncertainty about tariffs.
“Where there seems to be agreement so far is that the United States and China have entered into a much more competitive relationship, and it will not matter whether one party or the other wins the election,” Maersk CEO Vincent Clerc said this week.