Global News Fresh decline in US imports from Asia further hobbles trans-Pac trade

US imports from Asia declined for the third consecutive month in November, deepening industry pessimism about the possibility of a pre-Lunar New Year cargo bump with factories in China planning to shut earlier than usual for the holiday amid weakening demand in North America and Europe.

Asian imports last month declined 12.6 percent from November 2021 to 1.3 million TEU, according to container statistics released Wednesday by PIERS, a sister product of the Journal of Commerce within S&P Global. November’s drop follows year-on-year declines of 11.8 percent in October and 4.2 percent in September.

Shippers and forwarders forecast that the decline in volumes in the eastbound trans-Pacific will continue to accelerate in early 2023 as a number of factories in China will begin furloughing workers in early January rather than waiting for the annual Lunar New Year celebrations to begin on Jan. 22.

It’s not unusual for factories in some Chinese cities to shut a few days early so workers can return to their distant villages for the holidays, or to remain closed a few days longer on the back end. But this coming Lunar New Year shutdown is shaping up to be longer than usual as demand in the US wanes.

Gene Seroka, executive director of the Port of Los Angeles, told a virtual press conference Wednesday that many factories in China and Vietnam have said they intend to shut down early and reopen later than in past years.

“Typically, they take two weeks out,” Seroka said. “This year we’re looking at four to five weeks. So effectively, the factories will start to close down around the seventh of January ... through about the sixth of February.”

When the factories reopen and have ramped up to full production, it will take about 12 to 14 days for vessels leaving Asian load ports to reach the US West Coast, so February will be an especially weak month for cargo volumes, Seroka said.

Global Port Tracker, which is published monthly by the National Retail Federation and Hackett Associates, forecasted earlier this month that US imports in February will fall 20.9 percent from February 2022, with year-on-year declines of 18.6 percent in March and 13.8 percent in April. Asia sourcing shift accelerating Jon Monroe, who serves as an adviser to non-vessel-operating common carriers, said advance bookings by customers for trans-Pacific vessel departures into January are dropping quickly. Some clients are saying their orders in the coming months will be down 30 to 40 percent from last year because of waning demand from their customers, Monroe told the Journal of Commerce.

In addition to dealing with weak demand, Monroe said carriers are bracing for the possibility of more supply-side destruction as factories in China are struggling to retain workers due to the government’s on-again, off-again COVID restrictions. US and European companies are responding to this chaotic situation by fleeing the country and contracting with suppliers in Vietnam, Indonesia, India, and other countries in Southeast and South Asia, he said.

“People really don’t realize how fast companies are leaving China,” Monroe said, adding that importers that had been sourcing from several countries outside of China intend to rapidly expand their sourcing options in the new year.

The exodus from China is creating supply chain challenges for carriers and their customers. Rather than having access to frequent weekly services from China to US ports on both coasts, retailers will experience lengthier ocean transit times that involve transshipment from smaller ports in Southeast Asia and South Asia to hub ports in the region. That will necessitate deployment of smaller vessels by carriers rather than the large vessels that are used in the trans-Pacific and Asia-Europe services, Monroe said.

“I expect 2023 to be a really tough year — for everyone,” he said.