Tough times

Although August saw some year-on-year increases in containerised cargo in Los Angeles and Long Beach, overall the numbers handled for 2008 are down across the board, says Stacey Jones, Halcrow’s regional director for the US West Coast, and president of the public/private sector FuturePorts group.

“Improved productivity and a decline in cargo volume has left terminals in Seattle, Tacoma and Oakland operating only at about 50% of capacity,” she says. “According to the Pacific Maritime Association, imports at all west coast ports during the first half of the year were down 8.6% from a year earlier.”

On top of this, dynamics in the industry on the east coast are affecting the numbers: “Carriers are routing more cargo through the Panama Canal to avoid trans-continental rail moves. And projects along and near the Eastern Seaboard are providing more choices for the industry.”

“A 4,000 teu ship might run through the Panama Canal, or come the other direction through Suez, instead of much larger ships heading to Southern California with loads for all regions,” says Ms Jones.

“Some industry observers link that decision to years of hefty rate hikes by the railroads, especially the two western carriers with their control of intermodal out of the West Coast.”

However, with major new terminal capacity coming on line at a time when container volumes are down and could remain so throughout 2009, the “inescapable conclusion” is that there will be overcapacity on the east coast, she says. “In addition, Southern California ports have significant untapped capacity, averaging only about 5,000 teu per acre, per year, when a throughput of 10,000 teu is possible, and being assessed in their environmental documents.”

As Ms Jones puts it, none of this is good news for the US west coast. Ports are the economic engine for the regions in which they operate, and it is inevitable that with a downturn, jobs will be lost.

“Although in Southern California there has been some relief to congestion, these ports should continue to strive to grow while being instrumental in the development of environmentally sustainable operational measures as well as the infrastructure necessary to support the industry,” she says.

The impact of environmental regulations was highlighted by Elizabeth Warren, executive director of FuturePorts, when she testifyied to the House Transportation and Infrastructure subcommittee hearing held at Long Beach in August.

Ms Jones says: “It has been a challenge for the industry to get its arms around the new environmental pressures and legislation as they continue to be a moving target and make it difficult for the industry to plan ahead and make investments in environmental measures that become irrelevant before they are even implemented. This is a very critical issue for FuturePorts’ members.”

Ms Warren told the subcommittee that it was by modernising terminals – replacing outmoded, high-emissions equipment and increasing the efficiency of operations – that vital port expansion and emissions reduction could be achieved.

She warned: “If business is not allowed to make the investment with a level of certainty that they will have a reasonable return on their investment, then they will take their business, and the jobs and technology, elsewhere.

US containerised imports from Asia have been weak this year, as they were in 2007. “If the housing industry continues to languish and credit remains tight, 2009 could be a repeat of 2008,” warns Ms Jones. “The industry is expecting continued slowdowns in 2009.”

There is also uncertainty as to how the financial turmoil will affect the industry: “There is talk that AIG may have to sell off its Highstar holdings which includes Ports America, recently formed through the acquisition of P&O Ports in the US and Marine Terminals Holdings,” says Ms Jones.