Study: Cargo diversions contributing to SoCal ports volume declines
Sizable diversions to other ports, in combination with a souring U.S. economy, have eroded cargo volume gains achieved at the Southern California ports over the past five years, according to a study released last week.
Despite the ports of Long Beach and Los Angeles recording significant gains in exported containers for the past two years, the study found that declines in imported and empty container shipments through the first half of 2008 had reduced the two ports' total container volumes to mid-2003 levels.
Presented by maritime consulting and engineering firm Moffatt & Nichol to the governing board of the Alameda Corridor Transportation Authority on Thursday, the study found that more than half of the two ports' import losses since January, nearly 200,000 TEUs, are 'likely due to diversions of discretionary cargo' as shippers seek cost-saving alternatives.
Most likely causes for the diversions are increases in long-haul rail intermodal rates, additional capacity through the Canadian ports of Vancouver and the newly opened Prince Rupert, and shippers opting for Panama/Suez Canal alternatives to the U.S. East and Gulf coasts, the study authors told the ACTA board.
The study found that rail movements of containerized goods from the U.S. West Coast have decreased more than 8.3 percent through the first quarter of 2008 compared to the same period in 2007.
While many in the industry have raised concerns that recently imposed container fees at the two Southern California ports could spark mass cargo diversions, the study's authors were not ready to support the hypothesis. 'It is premature to conclude that the diversion component is due to future infrastructure and environmental fee proposals,' the authors said.
A 2006 academic study concluded that container fees above a certain level could spark mass cargo diversions from Long Beach and Los Angeles to other ports. If the fees climb to $100 per TEU or more, the U.C. Berkley study found, the Southern California ports face the potential loss of at least 1 million TEUs each per year. An existing $50 per TEU PierPass gate fee, will be joined by year end by a $35-per-TEU and $15-per-TEU taxes imposed by the port authorities earlier this year. In addition, a state bill approving a $30-per-TEU fee is awaiting a signature from Gov. Arnold Schwarzenegger, in order to be assessed by the end of the year.
Despite the news of import declines at the two ports in the first half of 2008, the study found double-digit increases in exported containers handled have 'largely offset' the losses.
The study predicted that the ports will move back to their typical volume trends by the end of the year, 'but outlook is weak through 2011.'
Long Beach, the second-busiest port in the nation, reported an 8.7 percent decline during the first six months of 2007, while the Los Angeles port, the busiest container port in the nation, recorded a 6.76 percent slide.
Combined, the two ports have slipped 7.7 percent from the year ago period, according to the study.
Despite the declines, the two ports remain the busiest container ports in the Western Hemisphere, far outpacing the third ranked port of New York-New Jersey.
Since the beginning of the year, industry analysts have projected that the two ports' volumes would register a significant upturn during the second half of the year, offsetting the then-projected estimates of a dismal first half. However, declines during the first half of the year turned out to be much higher than earlier estimates projected.
Container volumes at the Port of Long Beach dropped 12.5 percent for the month of June compared to the year-ago period, while the neighboring Port of Los Angeles reported a one-month 11.7 percent drop in total container volumes over June 2007.
June marked the 14th monthly decline for Los Angeles in the past 16 months. The Los Angeles port has not recorded a monthly increase of more than 1 percent since February 2007.
Next door, Long Beach has reported month-to-month declines for eight of the past nine months, however the one non-declining month, December 2007, registered a statistically insignificant increase of 0.02 percent.
Despite the two ports suffering the largest declines of the four major U.S. West Coast port complexes, the Moffatt & Nichol study found that the Southern California ports retain a 'better than 70 percent share of West Coast volumes.' ' Keith Higginbotham