Cargo volumes at the ports of Los Angeles and Long Beach are rising again. According to research from JLL, cargo volumes increased 25% in April after declining significantly in February and March. Imports from China catalyzed the activity. The country reopened in March after shuttering businesses for two months due to the coronavirus pandemic.
“China issued the order in the middle of Chinese Lunar New Year. People couldn’t get back to factories, so it took a while to get things going again,” Walter Kemmsies of JLL, tells GlobeSt.com. “It wasn’t until March before China was near functional when it comes to producing things. That is why the volumes were down in January and February, and in March the recovery started. In April, they not only got the normal shipment but the backlog.”
While the shelter-in-place orders have impacted consumer spending overall, some goods have seen an increase in demand. As a result, these items have been backordered as shipments were delayed from China. “Consumers are spending more on things where you can social distance, like bicycles, fishing rods and tennis rackets. A lot of those goods have been back ordered and they are coming in,” says Kemmsies.
While the increase in cargo volumes was good news, the future is still uncertain. “The jury is out on what happens in the third quarter. For retailers to sell goods in the fourth quarter during the winter holiday season, you need to receive goods between September and October,” says Kemmsies. “So far, we have only seen cancelations through July. The September and October is untouched, but we won’t know for another two to three weeks what that will look like.”
As of now, no holiday shipment orders have been altered or delayed, but that could change in the coming weeks as we see new surges in the coronavirus outbreak. “Most ships operate on an end of June or July fiscal year, and we have been putting in forecasts of 12.5% declines in container volume for the year at the ports,” says Kemmsies.
In addition, Kemmsies says that the pandemic isn’t the only factor putting pressure on cargo activity. There was already downward pressure on the market this year due to trade disputes and carrier alliances. “The US government has been unhappy with the trade agreement, and they are pushing companies very hard to leave China,” he explains. “In industries where national security is an issue, the US position is that those companies have to develop manufacturing capacity in the US.”