The Port of Los Angeles, the nation’s busiest seaport, said today it handled more tonnage in October than in any month in its 111-year history, aided by seasonal demand, stable U.S. economic activity, and a potentially significant acceleration in import tonnage ahead of the Trump administration’s threatened Jan. 1 tariff increases on Chinese imports.
The port processed more than 952,500 twenty-foot equivalent units (TEU) last month, a 27.2 percent surge over October 2017 totals. The prior monthly record was set last November with 924,225 TEUs.
Import traffic last month rose 26.7 percent to 485,824 TEU. Exports rose 20 percent to 173,824 TEU. “Empty” containers, boxes that normally sail back empty to Asia for subsequent cargo stuffing, rose 25 percent to 292,906 TEU, the port said.
The October volumes were materially stronger than the solid numbers originally expected, according to Todd Fowler, analyst for Keybanc Capital Markets. The key variable was the level of inventory “pull-forward” as U.S. companies scramble to lock in purchases from China ahead of the expected tariffs and tariff hikes. In a note today, Fowler estimated that pull-forwards may account for 10 to 15 percent of the port’s fourth-quarter import volumes, or about 400,000 containers. This will translate into a 5 percent increase in import volumes for all of 2018, he projected.
The advance ordering, combined with the economic impact of the tariffs themselves, may hamper the port’s first-quarter results, said Phillip Sanfield, a port spokesman. For its part, the port does not know how the fourth-quarter numbers will shake out. However, Fowler said port officials agreed that pull-forwards will account for volumes that are above its normal seasonal levels.
The latest round of tariffs, imposed in October on $200 billion in Chinese imports, started at a 10 percent rate and is set to increase to 25 percent, effective Jan. 1. President Trump has also threatened to impose tariffs on the value of all Chinese goods, estimated at well over $500 billion. So far, tariffs have been levied on $250 billion of China’s imports to the U.S
Danish giant Maersk Line (OTCMKTS:AMKBF), the world’s largest container line, said today that the U.S. tariffs, and reciprocal tariffs imposed by China on $60 billion of U.S. goods, will shave 0.5 to 2 percent from the global container trade over the next two years. U.S. import volumes from China could drop precipitously in January should the tariff increases take effect, Maersk said.