Chart of the Week: Inbound Ocean TEUs Index – USA SONAR: IOTI.USA
Bookings for 20-foot equivalent container imports (IOTI) are up 27% versus mid-June of 2019 and 11% over last year. With all the talk and expectations of nearshoring, goods coming from overseas are still flowing strong and having a noticeable impact on domestic transportation patterns.
The IOTI is a 14-day moving average index of orders (bookings) of 20-foot equivalent containers (TEU) based on the time of departure from the port of origin. Bookings lead customs clearings by about two to three weeks on goods coming from China to Los Angeles, and over a month on containers landing on the East Coast.
Customs and the IOTI have a decent correlation on a lag, but customs is inhibited by port infrastructure and labor, while bookings have little to no limitation on scale. Customs clearings in the above chart are based on shipments and not containers, but the connection is still present.
The geopolitical environment is arguably more chaotic than it was in 2019, and the call for supply chains to diversify away from riskier sources of materials and production has been growing throughout the pandemic era and beyond. The world has entered a phase of deglobalization—at least in the headlines.
The maritime import data paints a very different picture, but really does not disagree with the premise that the world climate is more challenged than it was five years ago.
One of the reasons for import growth comes from the concerns over container-ship capacity being tied up in longer transits as they try to avoid the conflict in the Middle East. While it does not have a strong direct influence on North American import lanes from Asia—where most of the imports originate—it does impact global capacity as a whole. More capacity is needed on Asia to Europe lanes, potentially dragging eastbound ships.
Spot rates on 40-foot equivalent units (FEU) jumped to start the year on the heels of the growing conflict around the Suez Canal and the Lunar New Year demand before slowly sliding. Those rates have jumped once again, remaining well above pre-pandemic norms.
There have been claims of carriers managing capacity availability, as the number of boats has been growing steadily for the past few years and, in theory, should be able to handle the additional demand without a 50% increase in rates over the course of a month.
Regardless of the carrier’s ability or reason, shippers find themselves once again dealing with uncertainty in rates and services on goods coming from across the ocean. This may be causing companies to pull forward orders with longer lead times to expected fulfillment.
Looking at the IOTI, there was a noticeable absence of a seasonal downward slide in April that was present both in 2019 and last year. Both years’ IOTI values fell 15% from early April to mid-May, whereas this year there was only a moderate downward trend of maybe a 5% deterioration.
Import bookings are up significantly to the largest U.S. port complexes versus where they were five years ago. Peak season for import demand is typically July and August, which means one of two things is possible.
Peak import season will be muted because companies have been more proactive or the doors are about to get blown off the ports. That is essentially saying we are back in an extremely uncertain environment that we thought we had left behind us.
Domestic transportation has also been affected. International container volumes (20- and 40-foot containers primarily used for maritime shipping) moving on the rails are up 16% year over year. Los Angeles’ outbound truckload tender volumes are up 35%, helping push tender rejection rates to their highest levels since 2022. Spot rates from Los Angeles to Chicago have increased 7% over the past month and 21% since March, according to FreightWaves TRAC.
About the Chart of the Week
The FreightWaves Chart of the Week is a chart selection from SONAR that provides an interesting data point to describe the state of the freight markets. A chart is chosen from thousands of potential charts on SONAR to help participants visualize the freight market in real time. Each week a Market Expert will post a chart, along with commentary, live on the front page. After that, the Chart of the Week will be archived on FreightWaves.com for future reference.
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