Imports rose in July. Has peak come early or are supply chains making up for lost time?

Dive Brief:

U.S. seaborne imports sunk 4% year over year (YoY) in July but grew 16% compared to June. The month-over-month increase led Panjiva to call this the "fastest start to the peak season since 2007." Port of Los Angeles Executive Director Gene Seroka said, not so fast — the increases are more likely to be explained by shippers making up for sharp reductions in the spring.
"The month of May was absolutely dismal, down more than 30% year over year, so there was a point coming that we had to restock inventories, get warehouses back up to sustainable inventory levels," Seroka said in a press conference Thursday, later adding, "We knew we were going to pick up pretty quickly."
Loaded imports fell more than 4% YoY at the Port of Los Angeles, but it was still the busiest month in 2020 thus far. The total volume in the first seven months of the year is down more than 15% compared to 2019. The rate of empty returns to Asia in July was nearly flat YoY (down just 0.1%), which could signal "a modest uptick in expected imports from Asia to the Port of Los Angeles," Seroka said. The return rate for the first seven months of the year was down almost 19% compared to the same period last year.

Dive Insight:

Upticks in imports from month to month paint a rosier outlook than the results in May — referred to by Seroka as "dismal" — but imports for peak season and 2020 as a whole are still expected to be muted. The National Retail Federation and Hackett Associates expect the overall 2020 import volume to be down 10% YoY.

Increases in imports are not shared evenly across sectors. Imports of home furnishings grew nearly 13% YoY and home appliances were up almost 34%. But the industrial sector had a sluggish month with imports of heavy machinery falling almost 22% YoY and imports of building products sliding 7%, according to data from Panjiva.

The Port of Los Angeles relies on industry observers to understand what kind of cargo is flowing through the facility, as it doesn't look in shipping containers. But "it would make sense that folks are trying to buy more products that will go into the homes," Seroka said.

As volume returns, the Port of Los Angeles will have room for cargo, Seroka told reporters while showing drone video of the container terminals.

"I can tell you that the cargo is moving smoothly," he said of the current state of the facility.

Expectations for peak season rest largely on the shoulders of consumer demand, which is difficult to predict right now, considering the federal aid that had been keeping it aloft has run out, and a new deal has yet to make it through Congress. Retail sales in July increased less than expected.

"The more Congress does to put spending money in consumers’ pockets and provide businesses with liquidity, the sooner we can get back to normal," NRF VP for Supply Chain and Customs Policy Jonathan Gold said in a statement.

But Seroka reminded reporters Thursday that the pandemic, economic downturn and uncertain consumer demand are not the only forces affecting the flow of goods. The nearly 22% decrease in loaded exports at the Port of Los Angeles is a reminder that the trade war is still very much in effect, and the goals set out by the phase one trade deal are far from being realized, he said.

"What we've seen so far is a requirement to buy $36 billion worth of goods, and we may edge our way toward $10 billion," Seroka said during the press conference, referring to the dollar amount of agricultural goods China agreed to buy under the deal. "We've got so much more to do here," Seroka said.

Exports at the Port of Los Angeles have been down 20 of the last 21 months, which Seroka blamed on the ongoing trade war. Imports from China did grow 4% YoY in July, which is the first annual increase for Chinese imports since December 2018.