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West Coast labor deal finally reached, but damage is done

The ILWU and PMA reached a tentative agreement on Wednesday. This could bring back some of the discretionary cargo lost during the negotiations. However, changing trade patterns and increased competition could mean the end of the West Coast’s dominance. 

The increased reach of East and Gulf Coast ports into the Midwest and a shift of sourcing away from China make Suez Canal routing appealing. The drawn-out contract negotiations and disruptions have consistently driven cargo away from the West Coast for the last 20 years.

The West Coast’s share of US imports from Asia has dropped from 71% in 2012 to 56% in the first five months of 2023. The East and Gulf coast’s combined share of imports from Asia has grown from 29% to 44% during the same period.

Port of LA Executive Director Gene Seroka said, “There are three things that importers and exporters tell me every day. You’re too expensive, you have very unique labor issues, and you are over-regulated.” He also said that ports on the East and Gulf coasts have made significant investments and they have been nipping at the West Coast’s heels for 20 years.

Sourcing shift risk for West Coast

The West Coast’s cargo is also at risk due to the growing diversion of production from China to Southeast Asia and the Indian subcontinent. However, China still dominates the sourcing landscape. China supplied 40.7% of US imports last year, down from 42.4% in 2021.

US and Gulf coast ports can enjoy the geographical advantage of the sourcing shift to India and Vietnam. India continues to attract more manufacturing as its port infrastructure improves. The share of US imports from India increased from 3.8% in 2021 to 3.9% last year.

Additionally, East and Gulf coast ports generally have more space to expand. On the other hand, the ports of Southern California, Oakland, and Seattle do not have the space.

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May US imports highest of 2023, but down 20% year-over-year

Retail sales continue to slow in the first half of 2023 and import volumes remain on track for double-digit declines from a year ago. However, some port stakeholders believe those declines will narrow in the second half of the year. 

Total US imports hit 2.07 million in May. This is the highest total import volume in 2023. However, the May number was still down 20.4% from the same month in 2022.

The declines were largely due to falling imports from China. Imports from China decreased 20% year-over-year in May to 825,728 TEUs. Even with the declines, May showed the highest level of Chinese imports since September 2022.

Early estimates show that retail sales grew 0.7% YoY in May. This follows a weak April where retail sales grew 0.2% from a year earlier. As a result, companies were unable to make a significant dent in inventories. April manufacturers and trade inventories were up 5.2% from a year earlier. Additionally, the inventories-to-sales ratio increased to 1.4 in April, up from 1.31 in April 2022.

Houston decline more moderate

Import declines have been fairly evenly distributed across major US ports. In the first five months of 2023, Asia imports to the ports of LA and LB fell 32% and 35%, respectively. The ports of Seattle and Tacoma saw a drop of 33.3%. The ports of NY-NJ and Savannah saw Asia imports decrease 30.8% and 26.1%, respectively.

However, the port of Houston has seen a more modest decline. Asian imports to Houston decreased 6.1% in the first five months of 2023 from a year earlier.

Preliminary estimates show May import volumes fell 23% from a year ago. However, the National Retail Federation believes the year-on-year gap will start falling to 15% in June before narrowing to single-digit volumes in Q3.

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About O’Neill Logistics

O’Neill Logistics is a leading third party logistics provider. We operate in California, Savannah, New Jersey. We service many verticals including Garments, Fashion Accessories, Footwear, Furniture, Home Goods, & Electronics. Additionally, we offer omni-channel distribution and all value-added services. Lastly, we focus on retail “drop shipment” fulfillment and item-level fulfillment services with same-day service offerings.

O’Neill Logistics has over 2 million square feet of state-of-the-art facilities. Additionally, we offer dray services to support the warehouses and provide distribution to retailers and wholesalers. Our reliable 3PL platform combines sophisticated technology with robust, flexible processing designs and speed-to-market gateway models.

Lastly, we aim to simplify your supply chain. We deliver exceptional service and can optimize your operational performance. Therefore, we aim to build, protect and foster strong business partnerships.

Please reach out to us if you have any questions or need assistance with your logistics solutions!