2015 started as a crazy year which affected all of us, from freight forwarders that arrange imports from China, to grain exporters in Illinois, to customs brokers in La to warehouses in US Gulf. The West Coast Ports’ slow down peaked the last 3 months (and finally reached an agreement), which not only locked US West Coast Ports but also the exports from Gulf, imports in East Coast, and others nationwide. We heard freight rates of $5000/40′ from Asia to US East Coast. We saw roll overs of 3 weeks in Port of Houston/Port of New Orleans. We saw 30+ ships waiting out-side of Long Beach. It had such a chain reaction that it affected the trucking and container availability in major cities like Chicago, Houston, New York, it even pushed Norfolk Port to shut down its rail connections just because of the excess flow of containers.
Well what a start! Now what? I believe Post West Coast Lockdown, stronger US Economy, valuing US dollar and merging services of carriers will feed this roller coaster to continue with a similar pace. US Economy is forecasting %3.3 growth (over %2.4 from 2014). We have a higher consumer confidence/spending, a much better job market and lowering energy costs. On the other hand, EU is expecting %1.3 growth, which is the highest since 2010 with a note that France and Italy, the EU’s second- and third-largest economies, stagnated in the final quarter of the 2014. So, with our stronger dollar we will be doing more on our imports, both in Pacific and Atlantic trades compared to 2014.
What about supply side of imports? The new and old alliances putting in their larger vessels will definitely support the capacity. The difference now will be since they have the same cost structure, they will have a better grab on reducing/increasing the freight levels. I think this is good news considering more stable supply will be supporting the importers and make it easier to forecast their ultimate logistics cost. One of the main challenges with the alliances will be the number of ports they will be calling and the overall number of sailing per week. Especially in smaller size countries in S. America and Asia, the overall shipping cost is expected to increase.
Exports are not looking that great unfortunately. Even if the lower energy prices are helping on certain extend, the strong dollar is making US Exporters more expensive against our worldwide competition. On top of that, political issues in Middle East, slowing economy in China, dropping oil prices/economic sanctions in Russia, and economic performance of EU zone are going to reduce our exports in 2015. Export prices on Asia lanes will be expected to go down considering the slower export volumes and increasing imports. I also think places that have been struggling with equipment availability (like Chicago, Cleveland, Memphis) will get better as a result of stronger imports and fairly slowing down exports. Atlantic trade rates will be staying more stable since they are already dipped, however I think the prices to M. East will shrink this year.
Hopefully it will not be as painful as the first few months of 2015 and everyone can focus more on their productivity and work rather than the politics for the rest of the year.