Transport News

Peak Season still a factor but to what degree is the question

Posted Date : 2015-07-31 00:00:00

peak-season-still-a-factor-but-to-what-degree-is-the-question
As has been noted in recent coverage on this site in regards to Peak Season, one underlying theme has been, and remains, how Peak Season is not what it used to be.

That is not to say there will not be any Peak Season-related activity. Make no mistake, there will be and things driving it from the seasonal nature of business activity and cargo flows to higher demand and increased e-commerce activity, among others.It is also worth keeping in mind there is little chance of any Peak-related pull forward, due to labor uncertainty at the nation’s West Coast ports either.

 It is fair to say we are all hoping that is not going to be an issue-in the many ways it was at the end of 2014 and into 2015-like that ever again.
                      In a recent story on this site about Peak Season 2015 prospects, FTR Senior Analyst Larry Gross noted that domestically Peak Season activity is likely to be muted, adding that a still-high inventory-to-sales ratio does not help things, while explaining that it is “moving up in a secular way in addition to some of the normal gyrations, and as our roadways and infrastructure become less reliable and slower, more inventory is needed.

Gross added Peak “has not been much to write home about” for years, with people only remembering the exception, or busy peak activity, as opposed to the norm, which is quieter. And he also noted that it stands to reason October will again be the most active month of the year, even though March was atypically high, following the tentative ILWU and PMA agreement being inked, which led to increased cargo import activity at West Coast ports as retailers worked off cargo backlogs.
Ben Hackett, founder of maritime consultancy Hackett Associates and co-author of the monthly Port Tracker report with the National Retail Federation, explained in the story he also has doubts regarding the 2015 Peak Season also pointing to the high inventory-to-sales ratio in recent months, which acts as a hindrance to true import flow in advance of Peak Season.
“Unless inventory moves quickly, it is fair to say there won’t be much of a Peak Season this year,” said Hackett. “This can also lead to ocean vessel voyage cancellations as well.”
Well, with many things coming in threes, another noted supply chain expert, Paul Bingham, vice president at Boston-based EDR Group, like Gross and Hackett, is not expecting a material boost for 2015 Peak Season either,
“I believe despite some ports having strong early 2015 growth, if one adjusts for East Coast vs. West Coast market share shifts in reaction to the 2014 West Coast port congestion, and the year-over-year comparisons with port congestion months last year, it doesn’t like a strong year for rapid trade volume growth,” he told LM.  “It is shaping up that 2015 Peak Season will not be as advanced as last year, when shippers shifted some ordering and shipping into the first half of 2014 as a hedge against early-contract expiration period slowdowns feared starting in July 2014. 
                            Those practices aren’t viewed as needed this year.” On a separate but related note, he explained that with weakness in some major trade partner economies (e.g. Japan, China, Southern Europe) and the strengthening of U.S. dollar exchange rates, it looks like overall forecast U.S. trade growth will be more modest than previously forecast.  That said, he explained the forecast for overall imports is for moderate demand growth, helped by strong dollar price impacts lowering the effective price of imports. “European and Asian economic growth in 2015 is not drawing in many more U.S. exports as those economies are mostly weak,” said Bingham. “U.S. manufactured goods import demand should be helped by relatively low oil prices allowing consumers to potentially spend more on other goods (and services) including more imports. 

However, the recent weakness in retail sales still reveals consumers who lack confidence in their financial and employment situations even as those continue to improve for most families in the continued U.S. economic recovery.  Many downside risks to the 2015 Peak Season forecast exist, including the influence of oil prices, exchange rates, equity market slowdowns, among other threats to trade consumption spending, whether risks originate overseas or not.
                                                ”As usual, there are myriad moving parts when it comes to assessing Peak Season prospects, and 2015 is no exception by any stretch. While the port labor issues are not weighing heavily on things this time around, there clearly remain enough things to monitor as things start to pick up."

Leave a Comment


0 Comments

Recent Articles