Forecasting Amidst a Pandemic Era

By Jock O’Connell

Not a day seems to pass without one or more maritime industry oracles warning of woeful times ahead for America’s seaports. Cargo forecasters are nearly unanimous in expecting the surge of containerized imports that began last spring will continue to inundate ports in Southern California and elsewhere in the U.S. through much of 2021, thus accentuating the enormous strain industrial and retail supply chains have been enduring. E-commerce, namely the stay-at-homes ordering online, is said to be largely responsible for the ongoing tide of imported goods, although one does wonder what more there is to order after your Peloton has finally been delivered.

The bleak outlook, in turn, has prompted maritime industry pundits to scour their thesauri for suitably apocalyptic synonyms to replace the now hackneyed “meltdown” to describe the logistical prospect facing, say, the Ports of Los Angeles and Long Beach.

No one should minimize the challenges that have confronted these ports, the indispensable hinges that link the ocean with the landside of the nation’s foremost global supply chains. As the blue line in Exhibit A demonstrates, inbound loaded container volumes have been nothing short of extraordinary at America’s busiest maritime complex.

The wonder, then, is that the entire edifice of maritime trade has not already crumbled. Instead, as PMSA vice president Thomas Jelenić aptly notes elsewhere in this newsletter: “No other gateway in North America could have moved 17.3 million TEU in the face of a pandemic. The year 2020 should be remembered as a year where nearly everything went wrong, yet cargo is still flowing.” Mirabile visu.

Still, the ports remain in the danger zone, redlining their capabilities while seeking new efficiencies. According to a January 13 article in the venerable and esteemed Journal of Commerce: “Six straight months of near-record cargo volumes have congested the entire Southern California supply chain beyond its capacity.”

(It would not be surprising to hear that Las Vegas casinos are now offering odds on when the Southern California ports will finally seize up like the Flathead V8 engine did in my late uncle Victor’s 1952 Ford.)

But what, really, is the aspersion at least tacitly being cast at the ports? Can it truly be that so many of the pundits of the maritime media are perplexed by the fact that a five-gallon bucket can’t accommodate a six-gallon pour? The gist of the critiques one hears, especially about the plight of the San Pedro Bay ports, is that congestion might easily have been averted if only the ports – along with every other element of the landside supply chain – had invested in a bigger bucket in the form of cargo-handling capacities they do not normally need.

Now, if it has suddenly become fair game to slight those who failed to foresee what few foresaw, it’s equally fair to look squarely at what forecasters had been telling us over the past several months, particularly those forecasters whose predictions are routinely and credulously reported each month in the maritime industry press.

And here’s the rub. Forecasting, especially when so many fundamentals are in flux, is exasperatingly difficult. Even the best err. Take, for example, the experience of the National Retail Federation’s Global Port Tracker (GPT), one of the most closely watched and highly regarded prognosticators of container import traffic.

Starting last July, GPT began issuing periodic forecasts for November, a month in which we now know 2.11 million loaded TEUs arrived at U.S. ports. That represented a whopping 23.6% bump over the preceding November. What hint were we given that that might happen? GPT’s initial July estimate expected that only 1.68 million TEUs would come ashore in November, a volume which would have been on a par with the 1.67 million TEUs imported in November 2019. In its subsequent forecast updates in August, September, and October, GPT actually lowered its outlook for November to between 1.58 million TEUs and 1.61 million TEUs. As late as its update issued on November 9, GPT still expected the final tally for that very month would total 1.70 million TEUs. Only by its December 9 update, as the flood of inbound containers was figuratively reaching their knees, did the GPT forecasters come close to hitting the mark by abruptly upgrading their November forecast to 2.07 million TEUs.

But, of course, that warning came much too late for anyone on the ground (or on the docks) to prepare for an onslaught that was already occurring.

GPT’s forecasts for December were no better. Starting last August, GPT looked for 1.56 million TEUs to turn up at U.S. ports in December, a level 9.3% below the preceding December. A month later, in September, GPT lowered that expectation to 1.53 million TEUs. By October, GPT averred that December might see 1.53 million TEUs arrive. November’s update moved the dial to 1.58 million TEUs, still well down from the 1.72 million TEUs American ports had handled in December 2019.

So, at this point a couple of weeks before Thanksgiving, what were port officials around the country, officials like Gene Seroka and Mario Cordero (respectively the executive directors of the Ports of LA and Long Beach) thinking? If they are as diligent in monitoring the GPT forecasts as the esteemed and venerable Journal of Commerce is in uncritically reporting them each month, Gene and Mario and their colleagues could reasonably conclude that handling the projected December traffic would be a piece of cake. They might also have planned to take a few extra days off at the holidays. Or, as maritime professionals, they might rightly have sensed that la merde était sur le point de frapper le ventilateur. (Pardon my French.)

Between its November and December forecast updates, it probably struck the forecasters that traffic was going to be a bit heavier than expected. The December 9 update pegged likely inbound loads at 1.91 million TEUs or 11.0% up from a year earlier. By its January 8 revision, GPT conceded that as many as 2.02 million TEUs had come through U.S. ports in December, a 17.4% year-over-year bump.

GPT won’t issue its own after-the-fact December reckoning until early February, but the McCown Container Volume Observer concludes that inbound loaded TEU traffic in the year’s final month was up 23.4% year-over-year. Panjiva, another box-counting outfit, found December container shipments to the U.S. were 20.4% over a year earlier.

2020 wasn’t an especially good year for anyone in the haruspication business. For their sake – and for everyone’s – let’s pray 2021 turns out to be much calmer and more predictable.

Disclaimer: The views expressed in Jock’s commentaries are his own and may not reflect the positions of the Pacific Merchant Shipping Association.