REALITY CHECK: Oct Port Volumes Still Sizable, Off Peaks

--Port Spokespersons Upbeat About 2018 Trade Prospects

By Vicki Schmelzer

     NEW YORK (MNI) - Trade volumes remained sizable in October, albeit off

peaks from recent months, and volumes at various ports were on track to set

records by year-end, according to MNI's exclusive interviews with U.S. port

spokesmen for the latest REALITY CHECK. 

     Volumes have remained lofty partly because of the strength of the global

economy and partly because of the measures taken by U.S. ports, from widening

and deepening waters to accommodate larger New Panamax vessels, to electrical

upgrades and purchases of taller cranes, they said. 

     The Virginia Port Authority (VPA) moved 265,490 TEUs in the month of

October, up 11% over October 2016, and breaking the prior monthly record set in

May 2017 by 18,619 units. A TEU is one 20-foot-long cargo container or its

equivalent.

     In terms of the major East and West U.S. ports, "everybody's in a strong

volume period right now, which is good news," said John F. Reinhart, CEO and

Executive Director of the Virginia Port Authority.

     "That's an indication of the global economy operating on a high level in

all major trade zones," he said. 

     The VPA reported import loads of 125,075 TEUs in October, a new historical

monthly high. 

     "We have never had imports that high in this port before," he said.

     On the drivers of this import demand, "It's both the local markets here

that we serve directly by trucks, and also some of the Midwest markets that we

continue to increase our service to by rail," Reinhart explained.

     The Port of Virginia has "a three-year history of growing at about 5%

compounded annual growth rate and this year, we're growing at approaching 9%,"

he said. 

     "So, it isn't just a one trick and it's been going on for a while and part

of it is the larger ships bringing more tonnage and reducing maybe the number of

ports of call," Reinhart said. 

     As example of a port upgrade, this month the VPA will put their own new

"40-plug mobile power unit" to work on the Richmond Express, an inland barge,

which will aid refrigerated cargo business at the Richmond Marine Terminal, he

said. 

     Instead of putting on a "plug-on gen set" so that each individual unit has

power for the 12-hour trip before receiving shore power, "now, with the 40-unit

power pack, we won't have to try to get those mobile units, those single units,

plugged in; So, we will be able to drive 40 refrigerated containers off of one

power pack," Reinhart said.

     "And that power pack stays with the barge, so it makes it much more

efficient, from an operating side, from a fuel consumption side, and

environmentally it's smarter and you don't have that logistical displacement of

those delivery units that you use when the trucks take the refrigerator

containers out of the terminal to the final delivery zone -  it really makes it

more efficient," he said.

     On the West Coast, the Port of Long Beach saw the busiest October on

record, at 669,218 TEUs. TEU volume was up 15% over the same month in 2016, but

down from the 2017 volume high of 720,312 TEUs seen in July. 

     Looking year-to-date, total TEU volumes were 6,234,830 TEUs at the end of

October, up 9.5% on the year. Total volumes for 2017 looked set to break the

record 7,312,465 TEUs posted in 2007, before the financial crisis began to

dampen trade flows. 

     "'07 - that was our busiest calendar year. This year, 2017, we are on track

to go beyond" 2007 levels to something closer to 7.4 million TEUs, said Lee

Peterson, spokesman for the Port of Long Beach. 

     "With a normal November, which is certainly looking to be that way, and a

decent December," in terms of TEU volume, "you could hear us in January

announcing our best year ever, when we get there," he said.

     Despite talk of U.S. economic recovery being stretched and jitters about a

cargo slowdown, the Port was "fairly optimistic about 2018," Peterson said.

     "Overall, we have no reason to believe we won't have a strong year next

year as well," he said.

     The Northwest Seaport Alliance reported that total international container

volumes, including empties, stood at 2,456,732 TEUs as per October. Year-to-date

international volumes were on track to be the fourth highest in the port's

history. 

     "We're forecasting modest growth for the rest of the year and into 2018;

We're expecting to see about 2% growth overall in container volumes," said Tara

Mattina, communications director at the NWSA. 

     While international volumes were up 6.0% year-to-date, domestic totals were

down 5.6% on the year.  

     "The higher international TEUs are offset by a weak domestic market -

primarily the Alaskan economy and its slow oil market," she said. 

     "We expect container volumes to rise to pre-recession levels, but the

marketplace remains intensely competitive," Mattina said, "Ships in the

Trans-Pacific trade still have overcapacity, which is keeping rates low." 

     In terms of cargo volume, autos were off 13.5% at 120,263 units

year-to-date, with the decline caused by "weakening U.S. demand and a shift in

manufacturing locations," according to the NWSA statement, released mid-month. 

     In contrast, log volumes, at 215,976 metric tons year-to-date in October

2017, were up 43.1% over year-to-date October 2016. This compared to yearly

totals of 176,928 metric tons in 2016, 236,557 metric tons in 2015, 276,628

metric tons in 2014 and 389,040 metric tons in 2013. 

     "The slowing Chinese economy influenced the decline in the log market over

the past several years," Mattina noted.

     While "log volumes have rebounded a bit," at the NWSA, the market for

export "remains flat," she said. 

     "The recent higher volumes reflect a new terminal operator with different

market connections in Asia," Mattina added.

     Port spokespersons agreed that seasonality in recent years has moderated,

with monthly trade volume peaks and troughs generally less extreme, barring

one-off events, such as the Hanjin bankruptcy in 2016, which skewed monthly

flows. 

     "This year, you see it in a pronounced way for us, because we're breaking a

lot of our own records," the Port of Long Beach's Peterson said. 

     But overall, the peak season is "not as clearly defined," as in prior

years, he said.  

     The VPA's Reinhart said "you don't have the trough to peak differentials

that you used to have."

     "And so, we still see a solid volume trend going out through Chinese New

Year - maybe not quite as high as the October months, but still year-on-year

increases in each of the coming months," he said. 

     Chinese Lunar New Year will be Feb. 16, 2018. 

     Ports were also keeping a close eye on China and the World Trade

Organization with regard to paper/waste paper.

     On July 18, China notified the WTO that by the end of 2017, the country

"will forbid the import of 4 classes, 24 kinds of solid wastes, including

plastics waste from living sources, vanadium slag, unsorted waste paper and

waste textile materials."

     At an Oct. 3 meeting of the WTO Committee on Import Licensing, five WTO

members, i.e. the U.S., the European Union, Australia, Canada and South Korea,

questioned China's import ban on solid waste "particularly for certain scrap

materials," with all five countries seeking "more information on which types of

materials would be affected" the World Trade Organization noted.

     "China's delegation responded that it will forward these concerns to its

capital for consideration," the WTO said at the time. There has been no new news

subsequently on the topic. 

     On the China ban, "we're going to have to wait and see until we get some

more specifics about that, even though we are getting so close to the New Year,"

said the Port of Long Beach's Peterson. 

     Earlier in November, the National Retail Federation and Hacketts Associates

released their Global Port Tracker report, showing that U.S. ports handled 1.76

million TEUs in September, the latest month for which after-the-fact data is

available. The estimate for October is 1.75 million TEUs, up 4.9% over last

year. 

     "While not records, the September and October numbers were among only six

times that monthly volume has hit 1.7 million TEU or higher since NRF began

tracking imports in 2000," the report said.

     2017 TEU totals are estimated at around 20 million, which would beat the

18.8 million TEU total from 2016 by 6.3%. 

     Editor's Note: MNI's REALITY CHECK on U.S. ports offers insight into the

U.S. economy, with ramifications for trade and retail sales. The REALITY CHECK

series is intended to complement and anticipate economic data. 

     Advance goods trade data for October will be released Tuesday, November 28

at 8:30 a.m. ET. 

--MNI New York Bureau; tel: +1 212-669-6438; email: vicki.schmelzer@marketnews.com

[TOPICS: MAURC$,M$U$$$,MX$$$$]