For January to April, imports at the Port of Oakland declined 5.5% compared with the first four months of 2007, while they were down 7.1% at the Port of Los Angeles and 10.5% at the Port of Long Beach. The ports of Seattle, Tacoma and Portland reported similar decreases. Though the recent declines represent a reversal for some ports, for others the reversal began much earlier. Tacoma, for example, saw a 7% decline in cargo volume last year compared to '06, while volume in Seattle was off 1% from the preceding year. By contrast, most major Gulf Coast and East Coast ports experienced modest growth or stasis in imports for the first third of this year and growth from 4% to 10% last year.
The West Coast declines corresponded to a 3.7% drop in Asia-to-America shipping volumes by member nations of the Far Eastern Freight Conference and a slowed (but not negative) rate of growth at all major Chinese ports except for Hong Kong. AP Moller-Maersk A/S reduced its trans-Pacific capacity by 30% last year, and according to the Copenhagen-based shipping company, while total global container activity grew 10% last year - and trade between Asia and some parts of the world expanded up to 20% - volumes between Asia and the US West Coast were flat.
Data from the American Association of Port Authorities indicates the reversal is part of a long-term pattern. According to the Alexandria, VA-based organization, the West Coast's share of Asian imports fell to 58% in '05 from 86% in 1999. Meanwhile the share of goods passing through the Panama Canal to Gulf and East Coast ports climbed to 40% from 11%. As long as the volume of Asian imports was rising at a rapid clip, the impact of the change was not evident. But once the volume began to fall, it became clear that the shift to non-Pacific ports was more significant than recognized.
At a conference in Long Beach in April, AP Moller-Maersk CEO Nils S. Andersen hazarded that the outsourcing of US manufacturing to China may have peaked or be near peaking. With projected growth at West Coast ports tied to continued growth in imports, such a scenario could be bad news for California, Oregon and Washington industrial markets. Of course, even if outsourcing peaks, trade volumes could continue to rise due to population growth; a return to economic growth and reversal of the dollar's slide would also create renewed demand for consumer goods.
And regardless of the nation's economic course, the health of the Los Angeles and Long Beach ports is threatened by continued delays due to road and rail congestion. Tacoma and Oakland have especially aggressive plans to lure shippers away from Southern California, but Mexico's rapidly expanding Port of Lazaro Cardenas and Canada's recently opened port at Prince Rupert, BC may pose the biggest challenge to Southern California's long-standing trade dominance.
As previously reported in GlobeSt.com, improvements to Kansas City Southern's rail lines make it quicker to go from Lazaro Cardenas to Houston and Kansas City than from Los Angeles. As for Prince Rupert, it not only offers the most up-to-date and efficient facilities of any North American port, but Canadian National Railway is attempting to purchase an Illinois short-line carrier that would enable it to ship goods directly from Prince Rupert into Chicago, the hub of the nation's distribution system. Prince Rupert is closer than Los Angeles to China's largest ports, reducing shipping time, and the Canadian railroad claims it could also get containers to the Midwest more quickly because its tracks are in better condition and less congested than its US counterparts.
Los Angeles and Long Beach are fighting back with various long-range programs to move cargo through the ports and to distribution centers more efficiently, but two factors stand in their way. First, residents and businesses in the densely populated communities between the ports and the outlying distribution centers, most of which have moved to the Inland Empire, resist many of the ports' initiatives. Second, many improvements depend upon the investment of hundreds of millions if not billions of dollars in railroad track and right-of-way upgrades. While the need for the investment is generally recognized, capital commitment has been inadequate. Though nobody expects Southern California to be anything less than a top-tier import and distribution market well into the future, its ability to achieve long-term growth projections is open to question.
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