REALITY CHECK: US SHIPPERS REPORT BIG RISE IN JUNE TRADE GAP
--Gap Possibly Abated in May, But the Worst Expected by Late Summer --Shippers Charging Massive Fees for U.S.-Bound Cargos from Asia --Europe Trade More Balanced, But Not Enough to Offset Asia
By Gary Rosenberger
ÿÿÿÿÿNEW YORK (MktNews) - A huge rate increase for U.S.-bound cargoes from Asia may have helped to quell the nation's import tsunami in May but it quickly grew in June and the worst is expected by late summer, say shippers and port officials.
ÿÿÿÿÿIn fact, messages of hope for an overall narrowing of the U.S. trade deficit were largely nonexistent but for some glimmers of positive sentiment on the European trade front.
ÿÿÿÿÿ"There is no good news on exports," said Guy Fox, Chairman of the Board of Global Transportation Services, a freight forwarder and cargo broker based in Seattle that conducts the majority of its business between the U.S. and Asia.
ÿÿÿÿÿ"You're going to see, I think, a lot more imports in August, September and October -- by then we'll be talking about a real trade deficit," he warned.
ÿÿÿÿÿThis is happening in spite of a $300 increase per 40-foot equivalent unit (a standard measure of cargo) for U.S.-bound shipments from Asia instituted May 1 and a $100 peak-season surcharge added for the June start of the Christmas import season, Fox said.
ÿÿÿÿÿThe increases together make it about 25% more expensive to ship Asian goods into the U.S. market than it did in April when the monthly trade deficit hit an all-time record, he said.
ÿÿÿÿÿ"Nobody skipped a heartbeat with those rate increases," Fox said. "Steamship companies are overbooked and they're still coming in full."
ÿÿÿÿÿThe staggering increase in shipping costs had been expected to somewhat alleviate the swell of incoming cargoes, but the fix was at best temporary, according to Fox.
ÿÿÿÿÿ"Ships were coming in only 90% full in May, but they've been coming in 100% full in June and I have been told that ships will eventually be 120% full," Fox said.
ÿÿÿÿÿAccording to Fox, costly air cargo shippers are taking on the slack where physical barriers prevent ocean carriers from taking on even more cargo.
ÿÿÿÿÿIndeed, demand for cargo space is so strong that shippers are picking what they will take and won't take, such that premium goods like consumer electronics are getting priority treatment while scrap metals and newspaper are getting a brush off, he said.
ÿÿÿÿÿU.S. ports contacted by Market News did not have June tonnage figures available, but May figures indicate that the increases in fees only made a minor dent.
ÿÿÿÿÿAt the Port of Long Beach, which houses the largest share of vessels on the U.S.-Asia circuit, saw about a 5% decrease in cargoes in May -- about 164,000 TEUs (20-foot equivalent units) from the 172,000 during April, according to Matt Plezia, an official for the Port of Long Beach.
ÿÿÿÿÿBut inbound shipments nevertheless were very elevated, up 20%, when compared to the same month last year, he said.
ÿÿÿÿÿOutbound cargos from the port were down about 3% from April but down about 8% from the previous year.
ÿÿÿÿÿ"We're looking into our busiest season and the challenge of moving more and more volumes," Plezia said.
ÿÿÿÿÿHe added that the Union Pacific railway bottlenecks that left goods sitting in ports on both sides of the Pacific has cleared up.
ÿÿÿÿÿ"We're running fairly smoothly" and there are otherwise "no reports of disruptions of service," he said.
ÿÿÿÿÿAt the Port of Los Angeles, the nation's second largest, the changes were somewhat more dramatic, with a 27% increase in imports from the previous May and an 11% decrease in exports, according to Al Fierstine, the port's director of business development.
ÿÿÿÿÿ"It means the trade deficit is dismal," he said. "But I also think the export side has bottomed out."
ÿÿÿÿÿFierstine noted that the major shippers his port deals with have indicated to him that they are making no plans to change their routing strategies.
ÿÿÿÿÿ"They're also extending themselves to rail and trucking companies to let them know about proposed volumes so that there are no surprises, and they won't get stuck like they did last year," he said.
ÿÿÿÿÿOther port officials also are describing mostly increases in U.S. imports.
ÿÿÿÿÿDennis Deuschl, a spokesman for the St. Lawrence Seaway Corp., said volumes of iron and steel, the seaport's biggest volume category, are up 31% since shipping lanes reopened for business in spring.
ÿÿÿÿÿWhile the seaport does not break down volumes into outbound and inbound categories, Deuschl said the increase reflects a growth in imports primarily from Eastern Europe.
ÿÿÿÿÿThe second largest category, iron ore, is up 8% -- also reflective of an import surge from Canada, Deuschl said.
ÿÿÿÿÿIf there is any good news stemming from the port's data, it's that grains -- a traditional major export category -- is about even with year ago levels.
ÿÿÿÿÿExports to Europe are on the rise and trans-Atlantic trade flows are somewhat more at balance than are Pacific routes -- but not nearly enough to be an offsetting influence, said David Griffiths, a marketing manager for Wallenius Lines Inc., the U.S. subsidiary of the Swedish shipping conglomerate.
ÿÿÿÿÿGriffiths, whose company essentially ships autos around the world, said he has seen a decent pickup in the two-way trade in automobiles between the U.S. and Europe.
ÿÿÿÿÿBMW Z3's manufacturered in South Carolina and Mercedes M class cars made in Alabama are finding their way back to Europe. He added that Detroit's Big Three have also made inroads into Europe markets this year.
ÿÿÿÿÿGriffiths said U.S. shipments to Europe (Wallenius has about 90% of market share of outbound automobile shipments) are expected to rise to 120,000 in 1998, up from 107,000 units last year -- despite glitches like the GM strike.
ÿÿÿÿÿBut he also noted a significant downturn in U.S.-built Japanese cars headed for Europe as currency devaluations have made it more profitable for Japanese carmakers to ship directly from Asia.
ÿÿÿÿÿ"The Asian market is down for U.S. manufacturers across the board," he said.
ÿÿÿÿÿWallenius shipments to Asia this year are down on the order of 25% compared to last year "and last year wasn't a particularly good year," Griffiths said. Wallenius does no shipping from Asia back to the U.S. market.
ÿÿÿÿÿGriffiths noted that the secondary or so-called "gray" market of U.S. autos to Japan saw some precipitous declines industrywide with exports expected to hit 12,000 or so from the 20,000 shipped last year and 31,000 at the 1995 peak.
ÿÿÿÿÿThe market for manufactured cars to Japan is faring worse with 1998 vehicle sales expected to be at about 33,000 vs. 69,000 last year and 129,000 in the 1995 peak.
ÿÿÿÿÿThe U.S. Commerce Department is scheduled to release international trade data for May on Friday at 8:30 a.m. EDT.
ÿÿÿÿÿThe U.S. trade deficit rose by $14.5 billion in March after a $13.2 billion rise in March.
Editor's Note: Reality Check stories survey sentiment among business people and their trade associations. They are intended to complement and anticipate economic data and to provide a sounding into specific sectors of the U.S. economy.
[TOPICS: MNREAL]
09:10 EDT 07/15
economeister.com |
