Covid pandemic shortages led to post-pandemic oversupply, and retail giants are now cutting or cancelling billions of dollars worth of orders and pricing down their inventory.
The Federal Reserve is raising interest rates to slow the economy and ease inflation. “It seems to be working,” Barrons reported. “Freight volumes across many modes of transportation have been shrinking.”
The Los Angeles trucking market recently saw the lowest weekly total for maritime import shipments since June 2020.
Signs of weakness in aggregate U.S. import demand are finally beginning to materialize at this and other U.S. ports, according to a supply chain market intelligence provider FreightWaves.
FreightWaves’ SaaS product, SONAR, monitors U.S. maritime imports coming into a trucking market for a given week.
“While Los Angeles and Long Beach (LAX/LGB) have both kept a steady stream of import volumes through the first seven months of 2022, the weakness in aggregate U.S. import demand is finally beginning to materialize at these ports as well,” FreightWaves reported. “Other U.S. West Coast ports such as Oakland and the Northwest Seaport Alliance (Seattle/Tacoma) have been posting significant year-over-year (y/y) declines in maritime import volumes for the past two months. Now, LAX/LGB will be joining the downward trend in significant y/y declines.”
During the pandemic, retail giants such as Walmart and Target overestimated consumer demand and ordered too much.
In 2021, shippers faced unprecedented challenges trying to move massive volumes of cargo through their supply chains, such as disruptions due to raw material and component shortages, runaway inflation, and labor shortages.
Now retailers are sitting on stale inventory and struggling to sell the surplus.
The downward trend in significant year-on-year declines of maritime import volumes “does not bode well for surface-side transportation markets, in which the ports of LAX/LGB feed a massive amount of demand from U.S. imports from overseas,” FreightWaves reported. “July 2022 was likely the last month that the Port of Los Angeles will publish any y/y gains in loaded imports for the foreseeable future.”
Growth has slowed in railroad volumes and freight volumes have started to shrink in some segments of the trucking market, Barrons reported. The total freight market has been in decline for the past four months, according to Citi data.
Freight rates jumped almost 10-fold in 2021 due to port backlogs, surges in cargo, and supply chain disruptions. As a result, importers had to scramble for space on container ships. Retailers like Walmart chartered their own ships to overcome bottlenecks in 2021.
In 2022, Walmart and other major retailers imported their goods earlier than usual, anticipating delays in shipping and demand that did not eventually materialize. They ended up with excess inventory, according to Marine Insight.
The cost to ship a 40-foot container to the West Coast of the U.S. from China is down about 60 percent from January 2022, Freightos Baltic Index reported.