Critical Freight Signal Turns Negative: Implications for Global Trade Dynamics

According to a recent report by Lori Ann LaRocco, there are troubling signs in the supply chain, notably regarding freight orders.The trend of empty container exports serves as a crucial indicator for future demand. Following discussions between the US and China in Geneva, many anticipated a surge in container shipments during peak season. However, current trade data suggests that this expectation may not materialize.

Understanding the interplay between various trade metrics can clarify uncertainties surrounding supply and demand dynamics. While there was a slight uptick in ocean freight orders, they quickly declined again. A key factor influencing these orders is the movement of empty containers—essentially signaling how much demand exists for new shipments.

Take Los Angeles and Long Beach ports as an example; their data shows no urgency for returning empty containers to be filled again. During the pandemic, there was significant pressure to send empties back to Asia promptly so they could be refilled and shipped back to America.Now, however, that urgency seems absent.

Despite numerous blank sailings causing some empties to pile up at ports—a situation expected to persist throughout summer—the lack of incoming orders means ocean carriers aren’t deploying more vessels as one would expect if demand where robust. Reports indicate that 49 container ships will skip calls at these major ports through early August—two more than reported last week.

This slowdown in ocean freight is bound to have ripple effects across other transportation sectors like trucking and rail services while also impacting warehouse operations. As competition intensifies for available containers, companies are enhancing their service offerings or features just to maintain customer loyalty amidst this challenging landscape.

The labor market is already feeling the pinch from reduced container volumes too. Gene Seroka, executive director of the Port of Los Angeles, has highlighted ongoing concerns about job availability due to fewer containers being processed at the port.In May alone, 717,000 container units were handled—about 5% less than last year’s figures during this time frame—with imports dropping by 9% compared with last year and down 19% from April’s numbers. Inbound cargo reached only 356,020 TEUs—25% below initial forecasts made before tariffs were introduced on April first.

Seroka noted that typically we see stronger volumes in May leading into peak season; however, when compared with our five-year average for May imports are down by about 17%. Until tariffs on Chinese goods decrease significantly enough not to burden US importers excessively—and until new trade agreements are finalized—the flow of goods will likely resemble a slow trickle rather than an open floodgate.