Despite billions in canceled orders, container imports stay near peak

U.S. imports accelerated in July, with inbound cargo from China reaching a year-to-date high, according to Descartes.

Walmart said Tuesday that it had “canceled billions of dollars in orders to help align inventory levels with expected demand.” Target disclosed the following day that it had canceled over $1.5 billion in orders, and revealed that it had shipped in much of its back-to-school goods early.

Nevertheless, U.S. import activity keeps chugging along near all-time highs.

Unprecedented throughput at the nation’s terminals has not been enough to clear queues of waiting ships. As of Thursday morning, there were still 130 container vessels waiting off North American ports.

According to newly released numbers from Descartes, U.S. imports totaled 2.53 million twenty-foot equivalent units in July. That’s up 3% year on year and 15% from July 2019, pre-pandemic. It was the best July on record, with volumes up 2% sequentially from June. This July marked the fifth-highest monthly volume ever recorded by Descartes.

chart showing data on imports
(Chart: Descartes. Data source: Descartes Datamyne)

U.S. imports from China rebounded last month, according to Descartes. It said volumes from China totaled 994,927 TEUs, up 6.3% year on year and 6.9% from June. More containerized cargo was imported from China in July than in any other month this year, with Chinese goods accounting for 75% of the year-on-year TEU increase.

“A number of factors — such as a slowing economy, inflation and high fuel costs — have not had the anticipated impact [of] slowing down U.S. container imports,” said Descartes.

The McCown Report analyzes volumes at the top 10 U.S. ports. McCown found that July imports at these ports were up 0.7% year on year. Imports at the leading East Coast and Gulf Coast ports rose 6.6% and imports at West Coast ports fell 4.9%.

August imports look strong

Import volumes continue to look strong midway through August. Month-to-date U.S. Customs data shows little letup in imports versus July, although some ports might see a small pullback. “Imports will begin to ease somewhat” in Los Angeles in August, predicted the port’s executive director, Gene Seroka.

Ports with large ship queues — New York/New Jersey; Savannah, Georgia; and Houston — are guaranteed to have strong import volumes through at least this month, simply because of cargo backlogs offshore.

chart showing data on imports
(Chart: FreightWaves SONAR)

And despite all the excess inventories held by retailers like Walmart (NYSE: WMT) and Target (NYSE: TGT), U.S. consumer demand remains strong. July retail sales — adjusted for inflation and seasonality and excluding motor vehicles and auto parts — were up 0.5% from June and 0.3% year on year.

Adjusted July retail sales were up 17.5% from the same month in 2019, pre-pandemic.

Sales inflation-adjusted to 2019 dollars (Chart: American Shipper based on data from U.S. Census)

National port capacity maxing out?

With consumption levels and imports still well above pre-COVID-era levels, the U.S. port system continues to operate at around maximum throughput. Monthly import volumes appear to be bouncing around near a capacity ceiling.

Descartes has previously stated: “Port congestion became a significant issue when the U.S. consistently exceeded import volumes of 2.4 million TEUs per month starting in March 2021. As long as monthly U.S. container import volumes are above 2.4 million TEUs, port congestion will continue until infrastructure changes are made.”

According to John McCown, author of The McCown Report: “Many ports and terminals are operating at or near capacity. The present U.S. port system is not in the position to accommodate the geometric growth in container volume that is on the foreseeable horizon. 

“To handle that growth, something more than just marginal improvements to capacity is needed. Among other things, new container terminals and even entirely new container ports will be needed to efficiently handle container volume over the ensuing decade. 

“This will require significant infrastructure investment, but that funding requirement needs to be balanced against the disruption that occurred recently. Without meaningful steps taken, such disruption will be more episodic in the future as volume grows over time,” warned McCown.

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