According to Maersk’s first North America Trade Report, which was released Thursday, the firm is forecasting total U.S. imports and exports to grow in a range of between 2 percent and 4 percent in 2018, and total Canadian trade to increase at least 7 percent. The report does not include Mexico, which company officials say will be covered in a subsequent report in the coming weeks.
Maersk predicts global trade volumes will climb more than 3 percent this year. Strong consumer spending in the U.S. will continue to drive imports, and the Canadian market will reap the benefits of its first full year operating under the Comprehensive Economic and Trade Agreement (CETA) with the European Union and the expected signing of a revised Trans-Pacific Partnership (TPP), an 11-nation free trade agreement covering a $12.6 trillion market and 15.8 percent of global gross domestic product (GDP) that originally also included the United States.
“For the U.S., gains will come from retail, chemicals, consumer electronics and grains sectors, but the nation faces a number of homegrown issues as the import-to-export North America Trade Report gap continues to widen,” Maersk said in the report. “The U.S. is facing a trucking crisis, rail infrastructure needs to be updated, terminal competitiveness lags behind other countries, while digital transformation is putting pressure on the way the U.S. does trade – not to mention the bunker fuel hikes and terminal congestions persist.
“Meanwhile, the outlook is more positive for Canada, which promises to be one of the fastest growing markets in terms of container trade across the Americas this year,” it added.
The report, which utilizes data from ocean shipping industry analysts IHS Markit and Container Trade Statistics, as well as internal data from Maersk Line, port terminal operator subsidiary APM Terminals and freight forwarding arm DAMCO, estimates total maritime container volumes to and from the United States grew 4.7 percent to 35.04 million TEUs in 2017.
U.S. imports surged 6.8 percent last year to 22.06 million TEUs, according to the report, while exports inched up just under 1 percent to 11.98 million TEUs.
According to the most recent data from the Commerce Department’s Bureau of Economic Analysis (BEA), the total U.S. goods and services trade deficit widened 12.1 percent to $566 billion in 2017, as total U.S. exports grew 5.5 percent to $2.33 trillion, while imports jumped 6.7 percent to a record $2.9 trillion. The disparity in growth rates between export values and volumes suggest the U.S. is exporting higher value goods and services than in previous years.
Total Canadian box volumes, meanwhile, grew 6.9 percent for the year to 3.99 million TEUs - 1.89 million export TEUs (up 10.2 percent from 2016) and 2.12 million import TEUs (up 3.49 percent).
Different Stories. According to Omar Shamsie, the recently appointed president of Maersk Line North America, although the United States and Canada are both growing, “they are in two very distinct moments.”
“The U.S. is in digital disruption and transformation, putting pressure on the way the nation trades, so much so that the end-goal must change so that booking a container and moving it across continents becomes as easy as posting a parcel, helping U.S. business flourish locally and globally,” he said. “It sounds far-fetched when you consider how the industry does business now, but the future of the whole supply chain needs to be discussed at the highest levels; U.S. competitiveness needs to come under a magnifying glass so the whole industry and authorities can address new ways of narrowing the ever-increasing gap with imports and update itself in the face of digital disruption and increasing competition from Asia, Latin America and Europe.”
In the United States, Maersk projects import volumes to grow between 3 percent and 5 percent in 2018 thanks to accelerating GDP growth, higher wages and lower unemployment rates, all of which should translate into increased consumer spending.
“We are optimistic on U.S. imports this year thanks to strong consumer growth, historically low unemployment and strong consumer confidence,” said Christian Pedersen, head of trade and marketing for Maersk Line North America. “Last year far exceeded our growth expectations and we still foresee strong imports growth in the range of 3 percent to 5 percent for 2018.”
U.S. export volumes, on the other hand, are projected to show only “moderate” growth of up to 2 percent, according to the report, thanks in large part to an expected increase in resin exports from the Gulf Coast region. Maersk expects exports from the Gulf Coast to grow 4 percent in 2018, compared with 3 percent export growth from the East Coast and 1 percent on the West Coast.
“The Gulf Coast is going to steal the limelight in 2018 and 2019 with the coming online of new chemicals plants, as well as investments in new distributions centers, helping provide a positive impact on U.S. trade,” said Pedersen. “However, the West Coast is expected to underperform this year and next, losing trade to Canada because of cost inefficiencies in its infrastructure and need for greater rail competition.”
Jack Mahoney, president for Maersk Line Canada, said the company expects U.S. West Coast ports to lose out on business to the Port of Prince Rupert in the near term, noting the port’s closer geographic proximity to Asia and direct connection to Canadian National Railroad.
“Prince Rupert is a competitive gateway to the U.S., a real alternative to its competitors further south,” he said. “Long Beach remains the top container port in the region, but congestion related to rail, trucking and other variables are impeding it from competing as effectively as it could be.”
In addition, the port, along with terminal operator DP World, has developed digital tools that allow customers to “make a container booking online in a few minutes today instead of taking hours in 2014,” said Mahoney.
Downside Risk. Both Pedersen and Shamsie warned of the effects of the growing U.S. trade deficit on container supply levels and, consequently, supply chain costs.
“Given the widening gap between imports and exports in the U.S., you end up shipping more empty containers – this adds unnecessary costs in supply chains,” said Shamsie.
“While we saw some of the strongest import performances from countries like India, Germany, China, Vietnam and Turkey in 2017, the results [of the report] underscore that the U.S. is ultimately a net importer with a growing trade imbalance,” said Pedersen. “For every two containers that are imported into the country, approximately one is exported; however, on the west coast this ratio is closer to three to one. Legislative, commercial and investment initiatives are necessary to boost exports to create a better weighted trade balance.”
The current shortage of long-haul and drayage truck drivers in the United States also presents a significant risk in terms of supply chain costs, said Pedersen.
According to the report, there were nearly 250,000 fewer drivers than necessary to properly support the nation’s supply chain at times last year and 10 U.S. cities are currently dealing with delays of one week or more as a result of the shortage.
“Hiring activity is going to be unable to keep up with the number of drivers required to move goods around the country in 2018,” said Pedersen. “Something has to give to bring trained drivers back to this industry, and this will probably involve sharing the extra cost among those who need the supply chain.”
One-Stop Shop. In a phone interview with American Shipper, Pedersen said the primary goal of the North America Trade Report - Maersk’s first covering the region though not the first of its kind - is to use the company’s rich data insights as an opportunity to start a dialogue with customers to improve supply chains in the coming years.
Pedersen said the key takeaway for him is that the global supply chain is being impacted in unexpected ways by the ever-accelerating shift from traditional brick-and-mortar retail sales to e-commerce. This, in turn, is changing the requirements and expectations put on transportation providers by shippers, and Maersk is looking to be on the forefront of that transformation, rather than racing to catch up to it.
The efficiency and speed-to-market of online retail compared with traditional consumption models in particular has spurred demand from cargo owners for increased visibility into their supply chains and increased control of the data flows created in transporting their goods, said Pedersen. But he said he doesn’t see those increased expectations as a threat. He sees them as an opportunity to find new solutions for Maersk’s customers.
For parent company A.P. Møller-Maersk, these trends have resulted in a company-wide initiative to provide fully integrated, technologically enabled supply chain solutions for all its customers.
Group CEO Søren Skou told attendees at the Maersk Capital Markets Day presentation in Copenhagen on Tuesday the company aims to become a “global integrator of container logistics” by providing simple end-to-end transportation services that will make it possible to arrange transportation by dealing only with Maersk, including inland transport, custom house brokerage, financing of goods, insurance, and consolidation, among other things.
In that way, Maersk is emulating the likes of parcel carriers UPS, FedEx and DHL, which can act as a single point of contact for all of a shipper’s needs, he explained.
Skou said the company also wants customers to be able to seamlessly engage with Maersk online. This means “digitizing” processes and allowing customers to “self-serve” when getting price quotes, booking cargo, creating or uploading documents, and paying their bills, all of which also speaks directly to those same heightened expectations in the e-commerce era.
Or as Pedersen put it, “We want it to be as easy for a customer - regardless of their size - to move a container with Maersk as it is to buy a pair of sneakers online.
“It’s not about creating a one-size-fits-all solution, because customers are all different; they have different needs and expectations,” he said. “It’s about creating a one-stop shop for customers of all sizes. It’s all about creating value.”