U.S. imports from Asia have plummeted over the last few months. The month of September alone declined 10.4% versus August. Forecasters do not see any improvement for imports when October imports are finalized. Industry experts are now projecting that imports will continue to decline through the end of the year.
It’s hard to comprehend how quickly the Asia-to-U.S. market has changed. Six months ago, shippers were scrambling to find enough service providers to handle their projected cargo requirements. Rates were at an all-time high and container space was a prized commodity. Fast forward to the present, rates have returned to pre-pandemic levels and ocean carriers are begging shippers for freight.
So why has the market shifted so quickly? The majority of shippers had issues getting their product to the market prior to the 2021 holiday season. This included many retailers that account for a large percentage of imports into the U.S. Trying to avoid another repeat of 2021, shippers of all sizes shipped their holiday season product early. Holiday cargo that normally would have shipped August through October was shipped May through July. This meant the traditional peak season took place in the summer months instead of the fall months.
Cargo being shipped early is not the only reason why imports have declined. Concern over inflation and consumer demand are also having an impact on imports. The uncertainty over these economic factors have caused retailers to cancel orders with their customers. Retailers are fearful of adding additional product to warehouses that are already busting at the seams.
Carriers are canceling sailings in an effort to address declining rates, inflation and lack of consumer demand. More than 5% of the November scheduled sailings have already been canceled. So far, the tactic of canceling sailings has not had any impact on rates whatsoever. Rates that were as high as $20,000 last year are now lingering around $2,000. If imports continue to plummet moving into 2023, carriers will likely start pulling significant capacity from the Asia to U.S. market. A few carriers are already being proactive by ending specific service loops.
The 2023 ocean contract negotiations are shaping up to be vastly different from 2022. Carriers had 100% of the leverage in 2021 and 2022. The leverage has definitely shifted to the shipper heading into 2023 negotiations. Countless carrier-shipper relationships have been destroyed over the last two years. Carriers should be prepared to feel the wrath of shippers. After all, it was the carriers that walked away from the shippers not the other way around.