The problem of excess inventory in the United States remains unsolved, and long-term demand for import freight may decline

According to CNBC's latest supply chain survey, the U.S. inventory overhang problem still exists, and storage costs remain high, which continues to impact retailers' profitability. The survey shows that oversupply and storage cost problems will continue in 2023, which will affect the long-term import freight demand in the United States.

The survey showed that 36% of supply chain managers expect inventory to return to normal in the second half of this year, and the same proportion believes that warehouse inventory will return to normal before 2024. 21% expect to return to normal in the first half of this year, and another 15% expect normal activities by the first half of 2024.

Still, uncertainty about inventory management remains high among most, with nearly 23% of supply chain managers saying they are unsure when they will be able to resolve excess inventory.

Retaining excess inventory will lead to a sharp increase in storage space and cost pressure

According to CNBC, 20% of the excess inventory in the United States is non-seasonal products. Most retailers will keep the excess inventory and refuse to liquidate at low prices. Only a few retailers choose to sell in the secondary market because the storage costs have affected their profits. Another reason is that the goods are not suitable for storage.

Excess warehouses suggest insufficient consumption power, and retaining excess inventory will lead to higher storage costs and tight storage space. Almost half of the respondents said that the biggest inflationary pressure they face is warehouse costs, followed by rent and labor, and many are continuing to pass these costs on to consumers, which will further push up inflation levels.

CNBC quoted ITS Logistics as saying that many customers in various industries have been using shipping containers, rail containers and 53-foot trailers for storage because the warehouses at distribution centers have become full.

The survey found that 50% of respondents said they used shipping containers for an average storage period of more than four months. Paul Brashier, vice president of ITS Logistics, pointed out that the high storage costs will appear in the second or third quarter earnings season, or affect the profits of major retailers.

Long-term demand for U.S. import freight may decline

Recent data on the manufacturing sector suggest that the U.S. economy is deteriorating, with the ISM manufacturing index at contraction levels according to March data released this week. The U.S. services sector was closer to contraction in March, with sharp declines in new orders, exports and prices, according to the ISM services index.

Inventory levels and consumer demand are the two main factors affecting U.S. import cargo volumes.

Excess inventory is affecting U.S. truck freight volumes in a number of ways. Not only are trucks moving fewer containers out of ports, but fewer freight is being shipped from warehouses to retail stores. Motive data shows a decline in truck freight volumes from warehouses to the five largest retailers in North America.

This may mean continued sluggish U.S. consumer demand, but some analysts speculate that this may also be a sign of supply chain recovery, with retailers consuming existing inventories, leading to a temporary decline in freight volumes.

However, FreightWaves SONAR intelligence shows that as the epidemic lockdown was lifted, ocean freight orders from China to the United States have rebounded slightly and recovered from the massive decline before the Lunar New Year, but the longer trend line is still a decline in ocean freight bookings.

Overall, overstocking remains a major problem for the entire U.S. retail market, and will affect demand on the consumer and supply sides, which will in turn have an indirect impact on orders from cross-border e-commerce sellers.

Editor✎ Ashley/

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