"The ships are 100% full. The containers are 100% full. You
can't get a container built. You can't pick up a ship from the spot
market. The whole container-shipping cycle is at absolu-tely full
pelt," exclaimed Jeremy Nixon, CEO of Ocean Network Express
(ONE), the world's sixth-largest container line.
October's ocean container market is "unbelievable,"
said Nixon during an International Chamber of Shipping (ICS) virtual
event last week. "We are sold out," he revealed.
"Our job now is to keep the network going from an
operational standpoint," Nixon continued. "The ports are
getting jammed up now. We're starting to see bottlenecks in the
supply chain. That's another challenge going into this winter."
Some market watchers thought volumes and rates would relent in
the wake of the China Golden Week holiday in early October. It
hasn't happened yet. The trans-Pacific market is still at its peak.
According to the Freightos Baltic Daily Index, spot rates from China
to the West Coast (SONAR: FBXD.CNAW) were at $3,847 per forty-foot
equivalent unit (FEU) on Friday. They've hovered around this same
stratospheric level since the last week of September - at triple
last year's rates.
Data on the number of customs filings for maritime imports
(regardless of volume; calculated as a seven-day trailing avera-ge)
likewise show no letup.
Countrywide filings frequency (SONAR: CSTM.USA) has bounced
around the same high level since August, well above last year's
levels.
Consumers are still spending
The number of U.S. coronavirus cases is on the rise. It looks
like cases could soon surpass records set in July. On Thursday, the
Labor Department reported 898,000 jobless claims (seasonally
adjusted), well above the consensus forecast for 830,000. Mil-lions
of Americans have fallen under the poverty line as a result of
COVID.
And yet, in aggregate, Americans are spending more. According to
statistics released Friday by the Commerce Department, con-sumer
spending rose 1.9.% in September. That was more than double the
consensus forecast.
"Consumer demand, as reflected in container trade, is in
full-blown rebound," commented Stifel shipping analyst Ben
Nolan.
In a new survey of companies conducted by investment bank
Evercore ISI, 71% of respondents reported "better" or
"much better" sales recoveries than expected, as of last
Wednesday. In the previous quarterly survey, as of July 15, it was
57%. And current sentiment is particularly strong among
homebuilders, pointing to more imports of building supplies and home
furni-shings.
Empty shelves and 'shipageddon'
Inventories are historically low. There is rising concern that
companies will not be able to import and deliver enough goods to
meet consumer demand during the holiday season.
The New York Times cited rising concerns over the so-called
"shipageddon" scenario, in which the retail supply chains
and parcel shippers descend into chaos as Christmas nears.
A report released Monday by investment bank Jefferies warned of
"empty shelves and raided storerooms," noting that "it's
not just local grocers running out of essentials."
"The summer and fall stages of the U.S. recovery have been
marked by incredibly strong retail and housing sales, which have
both surpassed pre-COVID levels by a wide margin," wrote
Jefferies. "Due to the torrid pace of sales and virus-related
sup-ply disruptions, inventory-to-sales ratios have plummeted to
record lows."
The Evercore ISI survey found that none of the consumer-business
respondents thought inventory levels were "too high" or "a
little too high." Only 10% said they were "about right,"
with 30% believing they were "a little too low" and 60%
answering "too low."
The implication is that retailers still need to bring in a lot
more goods, primarily from China. If so, that is bullish for ocean
con-tainer lines and concerning for U.S. shippers in terms of
tran-sport timing and availability, and spot and contract pricing.
Stimulus and Trump vs. Biden
The latest data sounds very upbeat. But there are huge
variables: the extent of the fall and winter COVID resurgence, the
outcome of the presidential and congressional elections, and the
fate of new federal stimulus.
A new report from Columbia University estimates that the U.S.
poverty rate rose from 15% in February to 16.7% in September despite
government stimulus, and that the poverty rate would have risen to
18% without stimulus. Using a total population estimate of 331
million, that equates to over 4 million people at least temporarily
saved from poverty (and given greater ability to buy food and other
products). Aside from the humanitarian bene-fits, that led to a
large volume of container imports that wouldn't have been ordered
otherwise.
The Evercore ISI fiscal policy team analyzed GDP effects of
future stimulus and election variables. The scenarios range from
nothing to a stimulus package in both Q4 2020 and Q1 2021.
The analysts' best-case scenario is for a Q4 2020 deal between
President Donald Trump and the Democrats, leading to a 4.2% positive
impact on 2021 real GDP growth, followed by a landsli-de
presidential/congressional win for Democrats, leading to a large Q1
2021 stimulus package, equating to an additional 6.3% real GDP
impact for 2021.
The worst case would be no Q4 2020 deal, and a Trump victory,
Republican Senate and Democratic House, equating to a smaller Q1
2021 deal with a 3.15% 2021 real GDP impact.
'I dread to think ... '
Just a few months ago, economic scenarios were dramatically
worse. Nixon of ONE emphasized just how much worse the situation
would have been if the container-shipping industry were not as adept
as it proved to be.
"I always like to think of container shipping as the
servant of global trade," said Nixon. "It is our job to
keep the global econo-my going. Keep the lights on. To, behind the
scenes, keep every-thing moving and flowing. Keep people fed.
"This has been a huge job this year. In all of the years
we've been in this industry, I don't think we've seen anything like
it. This has been a huge roller coaster, with ups and downs and
changes and shifts.
"If you go back to April, when we suddenly had to work from
home globally - not just us but all the stakeholders - and we had to
keep things moving, that was an incredible task.
"The fact is that we now have a lot better systems and
technolo-gy and planning than we used to have. We have a lot more
digi-tized tools to help us. I think it's amazing as an industry
that we managed to do that [keep trade flowing during lockdowns].
"And thank goodness we did, because otherwise, things would
have come to a very, very quick halt. If this had occurred 10 years
ago, I dread to think what would have happened." Click for more
FreightWaves/American Shipper articles by Greg Miller
MORE ON CONTAINER SHIPPING: Trump vs. Biden: How the winner
could affect ocean shipping: see story here. Get ready for blowout
Q3 results in container shipping: see story here. U.S. import
bonanza could extend into 2021 on 'record' restoc-king: see story
here.
- Via Raffaele Paolucci 17r/19r - 16129 Genua - ITALIEN
