Study: SoCal ports volumes rebounding but serious challenges loom
Southern California ports can expect a single-digit uptick in cargo volumes this year.
But continuing sluggishness in the national economy, ongoing labor negotiations, rising fuel prices and new federal security measures could send the year's overall performance into a tailspin, according to a leading regional economic group.
In a study released Wednesday, the Los Angeles County Economic Development Corp. (LAEDC) predicts the neighboring ports of Long Beach and Los Angeles will record a 1 percent increase in container volumes for 2008, rising to a collective 15.8 million TEUs, from a reported 15.7 million TEUs at the end of 2007.
Last year the two ports, together the busiest container port complex in the Western Hemisphere, reporting a 0.2 percent decline in container volume, the first combined decline in container volumes at the complex in recent memory.
| Kyser |
Jack Kyser, LAEDC senior vice president and chief economist and the study's author, pointed out that while the 2008 estimates show upward movement, they are 'quite a comedown' from the 12.5 percent year-over-year increase reported in 2006.
One recent bright spot for the two ports has been a surge in export container volume that began in 2007 and fueled to a large degree by increased international buying power due to the declining U.S. dollar.
LAEDC expects leading export categories such as electronic parts, computers, optical/photo and medical equipment to boost the two ports' export volumes in 2008 by 15.6 percent to 3.7 million TEUs, from 3.2 million TEUs in 2007.
Imports through the two ports are expected to remain virtually unchanged this year, with the LAEDC predicting a less-than-100,000-TEU change to the 8.1 million imported TEUs reported last year.
The LAEDC study predicts a slightly better picture in two-way value of trade moving through the two ports this year. The group estimates the port complex will see a 4.7 percent increase in the two-way trade value through the Los Angeles Customs District, from $349.4 billion last year to an estimated $365.7 billion for 2008.
The study forewarned that several potential problems, depending on their outcome, could swing the numbers into the negative.
'2008 won't be a walk in the park for Southern California's international trade industry,' Kyser said.
The most dominant potential problem facing the ports is the uncertainty of the overall U.S. economy, the study said.
Last year's decline in container volumes at the ports was likely tied to several negative macroeconomic forces. 'The most visible negative was the housing industry slump, which quickly spilled over into imports of wood products and furniture,' Kyser said in the study about 2007. 'U.S. auto sales also stalled out, which crimped imports of vehicles and parts. In the meantime, retailers moved aggressively to whittle down their inventories in anticipation of a weak Christmas.'
The study implies that if continued downturns in the overall economy exacerbate, the result could be a greater than predicted impact on the ports' 2008 volumes.
Kyser also pointed to ongoing labor contracts talks between the shipping industry's Pacific Maritime Association and the International Longhsore and Warehouse Union.
'While negotiations have started early and are expected to be smooth, problems could crop up,' he said.
The implementation of various federal security programs at the ports are also a potential source of added problems. Enrollment for the Transportation Worker Identification Credential, required for all workers seeking unescorted access to the ports, is already underway at Long Beach and Los Angeles. However the number of signups to date have been so low that the Department of Homeland Security recently extended the national deadline for enrollment by seven months.
Kyser also notes that an unknown factor in the TWIC enrollment is how many truck drivers will drop out of the industry due to immigration ineligibility. If the drayage fleet is impacted as much as some suspect, Kyser believes this may have a serious impact on driver supply.
The impending implementation of the federal '10+2' rule could also make matter worse for the ports.
'It could be quite onerous for smaller importers and freight consolidators,' said the study, 'and also is a concern due to its perceived costs and potential for delaying shipments.'
Kyser also pointed to the potential impact of further increases in fuel costs, predicting that there is unlikely to be any relief in diesel prices throughout 2008.
The LAEDC study also identified several long-term challenges faced by the two ports.
Kyser identifies environmental remediation as the major hurdle for the future growth of international trade in Southern California.
Both ports need to increase throughput to meet expected long-term increases in cargo, and yet, said the report, both ports have terminal projects that have been stalled by environmental challenges.
'Environmental and community groups vigorously oppose steamship terminal and rail intermodal facility expansions, even though many of these should reduce pollution,' Kyser said.
The growing possibility of competition from new and developing ports is also a serious challenge facing the Long Beach and Los Angeles ports. The LAEDC study points to the development of the Punta Colonet port in Mexico, the opening last year of a new container facility at the Canadian port of Prince Rupert, and the expansion of the Panama Canal as potential long-term threats to the Southern California ports' dominance.
The full International Trade Trends & Impacts report, in PDF format, is available at the LAEDC Web site, www.laedc.org. ' Keith Higginbotham