by Wall Street Journal
Next month, shipping giant AP Moeller-Maersk will make a move that would have been unlikely a decade ago. A line of 6,000-container ships that now goes to Southern California will dock in Seattle instead.
While that represents a small fraction of the eight million containers handled annually at the Port of Los Angeles, it is an example of how the nation's largest port is coming under pressure as volumes drop. New regulations, such as tougher environmental restrictions, have made the port more fuel efficient, but the additional costs have made it more vulnerable to losing market share of U.S.-bound goods.
The Port of Los Angeles, shown idled by protests in 2008, is coming under pressure as volumes decline. Container volume fell 6% last year. Associated Press "Business on the West Coast will be more competitive" in the current economy, said Geraldine Knatz, the executive director of the port. "Pacific Northwest ports are marketing against us."
For years, the Los Angeles container harbor and its adjacent port in cruises Long Beach Harbor had a stranglehold on U.S. imports, serving as the point of entry for goods headed as far as Chicago and Miami. Together, the two handle four out of 10 containers that come to the U.S.
But container volume at Los Angeles was down 6% in 2008 and fell 32% in February from a year earlier. The hub of roughly 42,000 jobs is preparing for possible midyear budget cuts, and many longshoremen are working part-time. Other ports have seen large declines, too.
This drop in volume comes just as ports from Portland, Ore., to British Columbia are rolling out new infrastructure in a bid to grab more of the container business. Some offer quicker transport times from Asia, or fewer environmental restrictions on trucks -- pitches that are increasingly compelling in the global trade slowdown.
"Every dollar matters," said David Arsenault, a vice president at Hyundai Merchant Marine. Some changes came this summer, Mr. Arsenault said, when surging fuel prices made ground transport from Los Angeles less competitive over long distances -- turning ports that offered better routes to distant markets into more attractive options.
Prince Rupert Port in British Columbia was once a site for shipping timber and pulp out of Canada, but it reopened in 2007 to service container vessels from Asia. The port makes the case that with its rail connections, lack of urban congestion and shorter distance from Asia by sea, it shaves a day or two off of transport to places like the Midwest. "We service the heartland of North America," said Don Krusel, president and chief executive of the port. "We're 99 hours to Chicago, 133 hours to Memphis" by train. Mr. Krusel said the port, which handled roughly 180,000 containers last year, will expand its capacity to two million containers by 2014.No one is predicting the cruises port of Los Angeles and Long Beach will lose their spot as the country's largest port complex by volume -- its proximity to the vast Southern California market is enough to ensure major business for years to come. But "because they were the first there, they were the first target" by West Coast upstarts, said Paul Bingham, an economist at IHS Global Insight.
On Monday, the Long Beach Harbor Commission was scheduled to vote on whether to approve the environmental report for a $750 million project to modernize two terminals. Officials said the project, which will take 10 years to complete, will enable the ports to handle larger ships and make it easier for containers to be transferred from a ship to an awaiting train, among other things.
Mr. Bingham predicted companies will increasingly re-evaluate what he calls "discretionary cargo" -- freight bound for places far from its port of entry. It is a process that has already happened at Wal-Mart Stores Inc., which went from shipping 80% of its freight through Southern California in 2002, to 15% today.
And major interruptions at the Port of Los Angeles -- including a West Coast lockout of dockworkers in 2002 and a large backup at the port in 2004 -- made companies wary of working exclusively with Los Angeles.
