US Retailers Brace for Surge in Imports Amid Labor Strike Concerns

US retailers are forecasting a significant surge in imports during the second half of 2024, driven by efforts to avoid potential disruptions from longshore labor strikes at East and Gulf Coast ports. Despite earlier concerns from carriers, forwarders, and industry analysts about a possible decline in imports during the traditional peak season from August to October due to front-loaded shipments earlier this year, the latest projections suggest robust growth. The Global Port Tracker (GPT) indicates that imports will continue to rise year-over-year at least through the end of 2024.

The possibility of a strike at East and Gulf Coast ports remains a major concern for retailers, with contract negotiations between maritime employers and labor unions stalled. Many retailers have taken preemptive actions, including shipping cargo earlier than usual and diverting shipments to West Coast ports. Labor unions are demanding substantial wage increases, and without a new contract agreement, there is a risk of strikes disrupting supply chains. The current contract is set to expire on September 30, adding urgency to the negotiations.

According to the GPT, August imports are expected to rise by 19.2% compared to the same period last year, a significant increase from the previous forecast of 13.5%. September imports are projected to grow by 6.5%, up from an earlier forecast of 3.5%. Forecasts for October and November have also been revised upward, with growth now anticipated through the end of the year. The first forecast for December predicts a year-over-year increase of 3.5%, contributing to an overall 12.1% increase in imports for 2024 compared to 2023. Retail sales are projected to increase by 2.5% to 3.5% over last year’s figures, underscoring the continued strength of consumer demand.

US imports from Asia have experienced consistent year-over-year growth since October 2023. Importers have been building up inventories and shifting cargo to West Coast ports as a precaution against potential labor disruptions on the East and Gulf Coasts. This trend is expected to keep import volumes elevated until at least the Lunar New Year in 2025, when factories in Asia typically close for a week or two for holiday celebrations.

Meanwhile, Canadian ports are facing growing challenges as the threat of a rail strike looms. Rail service disruptions could severely impact Canadian West Coast ports, which rely heavily on intermodal rail to move cargo. Both Canadian National Railway (CN) and Canadian Pacific Kansas City (CPKC) have already begun embargoing freight in anticipation of a strike, with intermodal yards nearing capacity. The Vancouver Fraser Port Authority (VFPA) has warned that any rail service outage longer than 48 hours could significantly affect port operations, especially since two-thirds of all cargo at the port is moved by rail.

Ocean carriers are preparing contingency plans to address potential disruptions in Canada, including diverting vessels to US ports and halting bookings for inland destinations served by rail. Although East Coast Canadian ports, such as Montreal and Halifax, have some buffer capacity to handle diverted cargo, prolonged rail service interruptions would create challenges, particularly in key rail-served markets like Ontario and the Greater Toronto Area.

The continued uncertainty around labor negotiations and the potential for strikes has led to increased complexity in managing supply chains. Retailers, carriers, and ports are all navigating the potential disruptions with contingency plans, adjustments to shipment schedules, and reallocation of resources to minimize impact. The outlook remains one of cautious optimism, with import volumes expected to remain elevated through the end of the year despite these challenges.