Ocean imports in July to hit highest levels in at least five years, report predicts

The International Longshore and Warehouse Union (ILWU) and West Coast ship management have taken three days off from negotiations aimed at reaching a new contract covering more than 13,000 workers at 29 ports from Seattle to San Diego. There is no such respite, however, for those handling cargoes pouring into U.S. commerce as retailers scramble to import their goods ahead of any labor-related disruption.

Both sides agreed to the break, which runs until tomorrow morning, so ILWU leaders could deal with a protracted labor dispute in the Pacific Northwest, where unionized dockworkers have been locked out by two Japanese-owned grain operators since earlier this year. The workers, represented by four ILWU locals, have operated without a contract since September 2012.

Today, two unions representing tugboat captains and crews joined with environmentalists in asking the Japanese government to intervene to help resolve the dispute. The groups have also asked the U.S. Coast Guard to take a more active role in patrolling the Columbia and Willamette rivers, saying management's use of nonunion tug and towboat operators with no experience navigating the rivers poses a safety and environmental risk to the region.

Meanwhile, containerized cargo continues to flow unimpeded into the ports covered by the ILWU-Pacific Maritime Association (PMA) contract. The six-year compact agreed to in 2008 expired on July 1. Since then, it has been business as usual on the docks, although no formal contract extension was agreed to until the three-day hiatus began on July 8.

What is clear is there is currently a lot of business to be handled. Import volume at the largest U.S. ports in July will reach 1.5 million twenty-foot equivalent units (TEUs), the highest monthly levels at least since 2009 and perhaps since the data sets were created in 2000, according to a monthly forecast released today by the National Retail Federation (NRF) and consultancy Hackett Associates.

The report projects 1.51 million TEU imports will enter U.S. commerce in August. In May, the latest month for which final numbers are available, 1.48 million TEUs moved through the ports, up 3.7 percent from April and 6.6 percent from May 2013, the report said.

The report found that West Coast ports handled 59 percent of retail containerized cargo in May, down from 62 percent in January. This indicates that retailers are increasingly diverting freight to East Coast ports in an effort to steer clear of labor disruptions. Of the ports canvassed, Los Angeles, Long Beach, Oakland, Seattle, and Tacoma are on the West Coast. The rest are along the eastern seaboard, with one, Houston, in the Gulf.

In the June report, NRF and Hackett forecast an earlier-than-normal spike in import volumes as retailers pulled orders and deliveries forward in anticipation of a possible work stoppage. Volumes that would normally hit their peak in August would instead hit their highs in July, the report said at the time.

Meanwhile, a second-quarter survey of hundreds of shippers by investment firm Morgan Stanley & Co. found the number of respondents reporting higher year-over-year inventory levels exceeded the number of respondents reporting lower year-over-year levels by the widest amount since the firm began tracking responses in early 2009. In a research note issued last week, Morgan Stanley said the responses could reflect a bump in inventory restocking following the harsh winter. The firm said some of the increase could be due to decisions in the quarter to pull orders forward in advance of potential labor unrest. However, it added that it would be impossible to quantify the impact.

Some shippers seem largely unperturbed by it all. A late June survey of about 50 shippers by New York-based Wolfe Research, an investment firm, found that the absence of acrimony between the two sides signals that a prolonged work stoppage is unlikely. Only 10 percent of respondents expect third-quarter volumes to be weaker than in the second quarter, according to the survey.

Still, about 30 percent of respondents did accelerate imports into the West Coast during the quarter in advance of the July 1 deadline, the firm said.

Jim Gaw, executive vice president of the Hub Group Inc., a leading intermodal marketing company that sells intermodal services for the nation's railroads, said his company saw a spike in import flows in late May and early June as several retail customers accelerated their order flows. However, that level of activity has since abated, Gaw said in an e-mail.