Slower shipping growth to give slammed US ports relief after record 2021

U.S. maritime imports will slow this year from the breakneck pace in 2021, giving busy ports time to catch up as supply chain pressure continues to cause issues worldwide.

Imports hit a record high in 2021, climbing to the equivalent of 33.0 million 20-foot cargo containers, according to Panjiva. The year started out on a slower note, with shipments to all U.S. ports in January falling slightly year over year to 2.7 million twenty-foot equivalent units, still a faster pace than pre-2021 levels.

Consumers spent more on goods instead of services while stuck at home due to rising COVID-19 cases and related restrictions, driving the need for companies to ship more supplies to meet that demand. Some reversal to that trend in 2022 should slow the growth, although companies will still navigate the same supply chain issues that are driving up their costs and contributing to soaring consumer prices.

"We are expecting imports to continue to increase in 2022, although at a single-digit level as opposed to the double-digit levels we saw in 2021," said Jonathan Gold, vice president for supply chain and customs policy at the National Retail Federation.

Russia's invasion of Ukraine will also play a factor. The U.S. is already warning shippers of potential cybersecurity threats, while the impacts to the global supply chain may trickle to the U.S.

Inflated supply chain pain

The sudden surge in demand brought on by the pandemic outpaced the available supply of everything needed to manufacture and transport goods through the supply chain, Gold said.

"Retailers have faced shortages of empty containers, available space on vessels, equipment and labor," Gold said. "This has all led to delays and congestion at key U.S. ports."

Shipping across the five largest import categories into the U.S., including a wide array of consumer goods, shot up in 2021 in line with the broader increase, according to Panjiva.

Pandemic-related federal stimulus also gave consumers more money to spend on goods, contributing to the increase in demand, said Joel Naroff, president of Naroff Economics.

"Imports for all of 2021 were bumped up by the government largesse," Naroff said.

The global shipping squeeze also raised costs for companies, both for freight and changes in how they produce their goods.

Monster Beverage Corp. executives said Feb. 24 that the company's gross margins dropped year over year in 2021, due in part to increased freight costs along with rises in the price of aluminum cans and raw materials. That forced the energy drink company to raise prices in some areas and shift production closer to where its drinks are sold outside the U.S. in regions including Europe, the Middle East and Africa.

Supply chain issues are also behind inflation climbing to a 40-year high of 7.5% year over year in January. Median inflation expectations for about one year ahead are just under 6%, according to the Federal Reserve Bank of New York's most recent survey of consumer expectations.

Clogged ports

Shipping at the five largest U.S. ports shot up in 2021, according to Panjiva. That is stretching into 2022, with the Port of Los Angeles reporting its busiest January ever, with a 3.6% rise in imports over the same month in 2021.

The growing backlog in 2021 prompted President Joe Biden to push the port and nearby Port of Long Beach to operate 24 hours per day, seven days a week.

More recently, there is at least one sign of progress. As of Feb. 28, the number of ships waiting to unload at Los Angeles and Long Beach has fallen to 58 from 109 in early January, according to Capt. Kip Louttit, executive director of the Marine Exchange of Southern California, which tracks traffic at the ports. The wait time for those ships ranges from no wait to six weeks, Louttit said.

Russia-Ukraine complications

Russian cyberattacks on Ukraine could have impacts beyond the region, including in the supply chain, according to a Cybersecurity and Infrastructure Security Agency warning issued in February. So far, however, there are no specific or credible threats to the U.S., the agency said.

The U.S. imports relatively little from Russia, with less than 1% of global shipping volume sourced from the country, according to Panjiva data.

Other U.S. trading partners like Germany and China have stronger ties to Russia that could cause impacts, said Zach Strickland, a market analyst for Freightwaves, in a Feb. 26 report.

"Most of the current supply chain woes have been driven by demand that exceeds the current transportation capacity limits," Strickland said. "This conflict will impact maritime shipping capacity worldwide and add to the already present price inflation."

Disruptions to U.S. imports from Ukraine are likely to impact all industries, but 59.7% of those imports in 2021 were in the metals category, according to a March 2 Panjiva note. Metals imports from Ukraine were up 61.8% year over year in the fourth quarter of 2021. February data will likely show a decline in growth, according to the note. Mineral products made up 59.2% of U.S. imports from Russia by value in 2021.

Mineral products imports from Russia, mostly fuels, were up 95.9% year over year in the fourth quarter of 2021, but this number will likely drop as international sanctions are imposed and consumer pressure increases, the note said.

Navigating the crunch

Now that the U.S. has surpassed a peak of COVID-19 cases brought on by the highly contagious omicron variant, consumers will shift some of their spending back into services, economists say. Restaurant and bar sales rose 27% year over year in January, according to the U.S. Census Bureau.

"This will give shippers a bit of a breather and allow them to clear backlogs more quickly," said Oren Klachkin, lead U.S. economist with forecasting and analytics group Oxford Economics.

Still, a shortage of truckers in the U.S. and warehouse backlogs are also driving continued supply chain issues. And consumer demand for goods will still rise in 2022, albeit at a slower pace than last year, so U.S. ports will continue to deal with higher traffic.

"A return to pre-COVID conditions in 2022 is unlikely for maritime shippers," Klachkin said.

Panjiva is a business line of S&P Global Market Intelligence, a division of S&P Global Inc.