Jensen predicts China cargo surge

In the aftermath of the U.S.- China agreement to temporarily reduce tariffs, maritime analyst Lars Jensen, Principal at Vespucci Maritime, is predicting: “an immediate surge of cargo from China to U.S.” but others aren’t so sure.

However, on May 12th, Eugene Seroka, Executive Director Port of Los Angeles, noted that tariffs are still higher now compared to April 1st: “The 90-day pause and reduction of tariffs between the United States and China is welcome news for consumers, American businesses, workers and the supply chain. Even with this announcement, tariffs remain elevated compared to April 1. To avoid further uncertainty and disruption of trade, both sides should work together swiftly toward a long-term agreement. Additionally, it’s important for the United States to work with other nations to reduce existing tariffs.”

Jensen cites two reasons for optimism:

1: There is “already a large amount of cargo ready to go, as U.S. importers have been adopting a "wait-and-see" strategy over the past month and abstained from shipping cargo which is already ready.”

2: The 90-day pause in the agreement “expires in the middle of the usual peak season for holiday-related goods going to the U.S. We should therefore expect a possible pull-forward of cargo creating a shorter, sharper, peak season from basically right now.”

But there are complications that Jensen and a U.S. shipping consultant have noted that could blunt this impact, due to the number of ocean carrier blank sailings to the U.S. These service cancellations have dispersed container ships to other parts of the world, which will now take time to redeploy for China/Asia sailings to the U.S.

Also, the U.S.-based shipping consultant told AJOT that shippers ordering products from China and Asia to the United States need “a clear line of sight that they presently don’t have” because of the confusing on and off again imposition of tariffs by the Trump administration.

Jensen’s analysis which appeared in a LinkedIn post on May 12th reflects the contrary forces that may undermine a resurgence of trade and might also dampen peak season orders for the U.S. holiday season: “Carriers will re-instate a lot of the blank sailings announced in recent weeks. The question is how quickly this can be done. That depends in part on where the vessels are physically. How quickly this can happen will also determine to which degree there might be a short-term capacity shortage on the Pacific resulting in escalating spot rates.

With the expected surge in cargo, we should also expect that the U.S ports which are right now facing a massive drop in cargo volume will 3-6 weeks from (now) switch to face a surge of cargo with a substantial risk of bottleneck issues and delays as a consequence.”

On the other hand, if shippers are pulling back on their peak season orders and on their sales expectations for the U.S. market, then there might not be light at the end of the tunnel.