Container cargo volume growth through U.S. ports will slow in 2016 as demand for American exports remains weak and U.S. retailers work through high inventories, according to a report by Moody’s Investors Service.
Moody’s said it expects container volume will rise 3% to 4% next year, down from 5% growth this year.
The strong growth in 2015 was due in part to a large influx of container cargo after West Coast dockworkers reached terms of a multi-year contract with their port employers in late February. During the months-long negotiation process, which began in May of 2014, the West Coast ports experienced periods of excessive delays with cargo ships waiting to enter the ports of Los Angeles and Long Beach for weeks.
Image: Port of Los Angeles
“The growth this year was inflated by the port gridlock and then the unwinding of that, which has really driven up inventories in the U.S.,” said Moses Kopmar, a Moody’s analyst and author of the report.
Retailers attributed the lack of a traditional peak shipping season this fall to that excess inventory, but an industry group predicted this week that retail shipping would end the year on a positive note, bringing import growth at major U.S. ports to 5.5% over 2014.
The Moody’s report also tempered expectations for 2016 growth at U.S. cargo ports due to weak global GDP, adding that “the ongoing gradual slowdown in China, which is a major participant in global trade and represents 30% of all container moves, continues to weaken demand across cargo markets.”
Still, Mr. Kopmar said 2016 will likely bring some welcome stability to the U.S. port sector because, for one, “you don’t have the uncertainty about labor-related issues of the previous year.”
He added that low oil prices and excess capacity in the ocean shipping sector will likely keep ocean freight rates low, in turn boosting cargo volume growth in the coming year. Combined with employment growth and healthy consumer spending in the U.S., Mr. Kopmar said, “our outlook for the shipping industry is stable.”
Over the longer term, he said, “our expectation is that container growth is going to grow relatively in line with GDP.”