A Third Of All Containers Shipped From Long Beach Port Are Empty

Tyler Durden's picture

In the past several months, it has been virtually impossible to make any sense of the conflicting trends involving US and global trade. On one hand, there is global trade, which as we have covered since the spring, has been in a state of consistent decline. Some example of this:

And of course China's terrible trade data for the past 5 months, which has seen the longest stretch of import declines since the financial crisis.

In short: only an economist, either a tenured one or one employed by CNBC, is unable to see that the world is sinking into a global trade recession, with a economic one soon to follow.

Where things get more complicated, however, is when looking at the US. Here, macro data throughout the summer had suggested more or less smooth sailing in the trade space, and it was only a week ago that the facade started to crack, following the ugly advance trade report, when as we reported there was a "16% Surge In August Trade Deficit; Imports Jump As Exports Drop."

But what really confused us, and others, was the "micro" reports from the ground. Take the following article from Bloomberg in September, in which we read that "Record Long Beach Port Traffic Shows Strength in U.S. Demand." Some more details:

The Port of Long Beach -- which is poised to overtake neighboring Los Angeles next year to become the No. 1 shipping gateway in the country -- had a record month in July, with cargo volume up 18 percent from July 2014. Figures being released later this month will show unprecedented traffic again in August, and early signs in September are “very very encouraging,” Jon Slangerup, the Long Beach port’s chief executive officer, said in an interview at Bloomberg’s offices in New York last week.

 

Overall, the two ports are handling 4 percent more cargo this year than last, Slangerup said. With consumers showing no letup, he predicted a record year for Long Beach in 2015, taking out pre-recession highs set in 2007. West Coast ports are poised to regain share lost earlier in the year, when backlogs led clients to divert cargo to East Coast destinations like Savannah, Georgia, he said.

The article's punchline:

When you look at the macros, you look at unemployment, consumer confidence, savings, available discretionary spending, all of those numbers suggest that we have more to spend,” Slangerup said. “The economy here is super strong relative to the rest of the world, and the strongest I’ve seen it in a very long time.”

As it turns out, the economy was neither "super strong", nor was "unemployment, consumer confidence, savings, or available discretionary spending" suggesting that we have more to spend. In fact just the opposite, because thanks to the WSJ we can now reconcile the seeming discrepancy between slowing macro and booming micro, at least as manifested by "record" west coast port traffic.

According to the WSJ, "shipments of empty containers out of the U.S. are surging this year, highlighting the impact the economic slowdown in China is having on U.S. exporters. The U.S. imports more from China than it sends back, but certain American industries—including those that supply scrap metal and wastepaper—feed China’s industrial production."

The magnitude of the shipping container "contagion" is stunning: in September, the Port of Long Beach handled a near record 197,076 outbound empty boxes. "They accounted for nearly a third of all containers that moved through the port last month. September was the eighth straight month in which empty containers leaving Long Beach outnumbered those loaded with exports."

As the chart below shows, the situation at LA and Long Beach is so dire, the amount of empty container has surpassed the 2008 crisis period, and is about to take out the all time highs from the peak of the 2006 credit bubble:

 

And here is the "record" West Coast port traffic in all its unglory: as noted above, empty containers now amount to a third of all West Coast port traffic in the US.

 

What is an empty container? The WSJ explains that after under normal conditions, containers filled with consumer goods are delivered to the U.S. and unloaded, they return to export hubs. There, they typically are stuffed with American agricultural products, certain high-end consumer goods and large volumes of the heavy, bulk refuse that is recycled through China’s factories into products or packaging.

Not any more:

Last month, however, Long Beach and the Port of Oakland both reported double-digit gains in exports of empty containers. So far this year, empties at the two ports are up more than 20% from a year earlier.

A big reason for the collapse in trade is the strong dollar: the empties are shipping out at a faster rate at many U.S. ports, particularly those closely tied to trade with China, while shipments of containers loaded with goods are declining as exporters find it tougher to make foreign sales. That’s at least partly because the strong dollar makes American goods more expensive.

The problem is spreading:

Outbound empties have mounted this year at other big gateways, too. In August, the Port of Los Angeles, the country’s largest single container port, handled more than 225,000 empty outbound containers, counted in twenty-foot equivalent units, a standard maritime industry measure. That was 21% more than a year earlier. The Port Authority of New York and New Jersey expanded its empty-container exports nearly 31.5% in the first eight months of this year, and empties outnumbered loaded container exports over that time.

Suddenly the discrepancy between the ugly macro data and the

Dollar-based or not, the end result is the same - global trade channels are rapidly slowing down.

And it is not just empty containers that are being shipped out: overall containerized exports are also tumbling: "Long Beach’s containerized exports were down 8.2% this year through September, while Oakland’s volume of outbound loaded containers fell 12.7% from a year earlier in the January-September period."

This data certainly puts that "record" Long Beach port traffic in a different perspective. Others admit the same:

“This is a thermometer,” said Jock O’Connell, an international-trade economist at Beacon Economics. “The thing to worry about is if the trade imbalance starts to widen.”

It is starting to widen: the U.S. trade gap has expanded sharply in recent months as exports have slipped, growing 15.6% in August to a seasonally adjusted $48.3 billion, according to the Commerce Department. U.S. exports fell 2% in the month to their lowest level since October 2012.

And as a reminder, net trade feeds directly into GDP, so the next time an idiot tells you that there are no direct linkages or contagion choke points between China and the US, feel free to take them to the Long Beach and show them the thousands of empty boxes whose contents one can label  simply as "recession".

There is, however, a silver lining: if the containers remain empty, and once the US slides back into depression, they can always be used for housing, just like now in San Francisco's unicorn bubble mania.

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BandGap's picture

We stopped exporting our hope.

 

LowerSlowerDelaware_LSD's picture
LowerSlowerDelaware_LSD (not verified) BandGap Oct 14, 2015 3:21 PM

And are only left with a little bit of Change (you can believe in).

ZerOhead's picture

The guy who invents foldable hinged shipping containers than can be collapsed and stacked is going to make a fortune...

NoDebt's picture

Please don't use the word collapse.  Bad JuJu.

NoDebt's picture

I have a solution to this problem (because I'm a solution-oriented guy, as you all know):

Instead of shipping them back, melt them down and produce raw steel with them.  Adds to our GDP, creates jobs.  Then ship the steel over to China where they make the raw steel into shipping containers for sending out more goods.  Adds to their GDP, creates jobs.

There.  I just fixed the global economy AND the imbalance of trade in 5 minutes.  I'm gonna have a drink now.  I think I need one.

wizteknet's picture

While it does sound like a good ideal there is only one problem, we don't own the the containers in the first place.

NoDebt's picture

Look, I'm a "big picture" guy.  I can't be dragged down into the details.  Just go make it happen.

Tom Servo's picture

I think we need to financialize the empty air.  It would be our greatest export!

 

ZerOhead's picture

They are working their way up from the trace gases like carbon dioxide first.

Next up on the bidding block is oxygen... I hear Soros and the UN/IMF/BIS are interested...

nuubee's picture

ZH, Tyler, empty containers from the Port of Long Beach or Port of Los Angeles, or San Francisco is nothing new, it's been this way for decades. It's called a "Trade Deficit". It is actually more profitable to keep those ships moving, even 1/3rd empty, than to have them sitting around doing nothing.

Ignatius's picture

I don't see why we should be sending ANY of these containers, our future middle class housing stock, back to Asia.

TBT or not TBT's picture

Nonsense.  America sells lots of services and the foreigners need something to put them in. 

Ignatius's picture

Well, yeah, there's that, also. 

I got a ton of ideas to move.

Stuck on Zero's picture

The real laugh here is what is in the other 2/3s of the containers: recycled materials: paper, cardboard, electronics, batteries, bottles, and stock certificates.

monk27's picture

I don't get it, what are we suppose to fill those containers with anyway ? WHAT have our "exports" been for the last 20 years ?? Electronics "Made in USA", really ??? LOL!

Pure Evil's picture

Maybe they'll use all those empty containers to store the corpses of all the domestic terrorists before burial at sea.

Bangin7GramRocks's picture

Or you could create a queer "financial product" called shipping futures. Traded back and forth by retarded coked out paper monkeys, this fantastic new product can "earn" hundreds of biilions and add positively to the GDP. #WINNING

ZerOhead's picture

Shipping futures... futures for an industry with NO future... PERFECT!

Where's Bylthe Masters when you need her...

Ms. Erable's picture

A better solution would be to fill them with Mexicans/Guatemalans (they're small - they stack easily)/ Peurto Ricans/Cubans et. al. and ship them to China.

GeezerGeek's picture

Or at least stack them end to end along the US-Mexico border. Cut a doorway in each and spray paint "su casa" on each one.

SixIsNinE's picture

and the FDA approval to ship US chickens to China for processing and shipped back as variety food products ...   didn't Chinese buy out Tyson ?

 

Pool Shark's picture

 

 

"...in September, the Port of Long Beach handled a near record 197,076 outbound empty boxes. "They accounted for nearly a third of all containers that moved through the port last month. September was the eighth straight month in which empty containers leaving Long Beach outnumbered those loaded with exports."

 

Uh;... wait a minute...

If 1/3 of the containers are empty, that means 2/3 of the containers have something in them.

Since when does 1/3 "outnumber" 2/3?

Yttrium Gold Nitrogen's picture

I also noticed that, but I guess 1/3 comparison refers to all (inbound+outbound) containers, it follows from the phrase "They accounted for nearly a third of all containers that moved through the port last month."

longwood's picture

Since more than one third of containers that are loaded are inbound.

all-priced-in's picture

I made up the numbers --

 

197,076 outbound empty

196,924 outbound full

over 1/2 empty outbound

 

200,000 Inbound full

 

197,076 + 196924 +200,000 = 594,000 total

 

197,076/594,000 = 33.1% almost 1/3

 

 

 

RichardP's picture

... all containers that moved through the port ...

equals both inbound and outbound. 

2/3 of both inbound and outbound containers have something in them.

197,076 is one third of the containers that were both inbound and outbound.  Not one third of only the outbound.


balanced's picture

[deleted] answered many times already, hah

Urban Redneck's picture

inbound vs outbound vs total

rounded: 

200k empties out of 600k total monthly volume

300k import & 300k export 

so we imported imported 300k boxes and exported 100K boxes (of real stuff) and 200k empty BLS Hope N Changes...

Pure Evil's picture

That's so common core, and.............raycist!

reTARD's picture

No worries... they're going to become new homes for the urban population.

HowdyDoody's picture

The Russians have much better uses for used empty shipping containers.

It's a small Klub and US ain't in it.

http://edge.liveleak.com/80281E/ll_a_u/thumbs/2013/Dec/11/b1c2aeef2ad6_s...

 

NoDebt's picture

This has QE4 written all over it.

Sudden Debt's picture

Why?

It's just pretty clear that America is exporting it's most precious commodity!

Air!!!

 

undertow1141's picture

Can we add 'disease' behind Debt, so people understand what it really is.

Pure Evil's picture

Too bad we couldn't export the FSA to China in those containers.

o r c k's picture

Loose change, change. For a change.

abyssinian's picture

Bullish!  fill them up with papers, ink and printers, Yellen will approve! 

snodgrass's picture

We should stop shipping empty containers and turn them into homes like they have in San Francisco. Only $1,000 a month rent. A steal.

The central planners's picture

The US DoD can fill those empty containers with oatmeal and drop it in the middle of the desert in Syria, and hope one of the good moderate folks go and find it.

Pooper Popper's picture

Well shit,,I might as well get loaded and head to the brothel....

 

WVHillbilly's picture

You may want to leave the herbal viagra at home...

undertow1141's picture

Musta be one hell of a hooker, left him crumbled on the floor, but don't fear the wookie is at his bedside.

TeamDepends's picture

Haven't these people considered setting the ship on fire and collecting on the insurance?