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In
another sign of how deep the global recession
has become, the ports of Los Angeles and Long
Beach reported their worst combined import
statistics for September in nine years.
September is often the busiest month at the
nation's biggest port complex, making it one of
the best barometers of the health of the economy
and international trade.
The port of Los Angeles received 309,078
containers packed with imported goods in
September, representing a decline of 16% from
the same month last year and 27% from September
2006, L.A.'s best month ever for imports. Long
Beach received 224,924 import containers in
September, a drop of 19% from a year earlier and
32% from September 2007, the port's best
September ever.
For the first nine months of the year, imports,
exports and empty containers through the port of
Los Angeles were down 16% at just under 5
million containers while the Long Beach port saw
a decline of nearly 25% at just under 3.7
million containers, compared with the same
period last year.
As dismal as those figures are for the two
ports, which rank first and second in the U.S.
in container volume and together rank fifth in
the world, a greater worry goes beyond the
immediate and substantial loss of local
trade-related jobs: Some of the ports' most
important tenants were so poorly positioned for
the downturn that they might sink completely in
a sea of billions of dollars of red ink, experts
say.
"Without a doubt, the Southern California ports
should be worried," said Neil Dekker, an analyst
at Drewry Shipping Consultants in London who
produces container industry forecasts.
"Companies will go bust; freight rates may take
years to recover."
The outlook could hardly be more ominous, said
John Husing, an independent analyst with
Economics and Politics Inc. in Redlands who
follows the effects of global trade on the
Inland Empire.
Seeing nothing but smooth sailing ahead for the
globalization that has reshaped international
trade, the world's shipping lines committed
themselves years into the future to orders for
new container ships that have as much as 69%
more cargo carrying capacity than the vessels
that were the world's largest in 2004, Husing
said.
He described it as "the worst recession in
modern times hitting an industry that was geared
for the opposite of what they are facing."
Through the first half of 2009, each of the
world's 17 biggest shipping lines were in the
red, according to Paris-based AXS-Alphaliner,
which maintains online databases for shipping
industry professionals.
Denmark-based APM-Maersk had losses of $540
million. Cosco Container Lines of China lost
$671 million. Hapag-Lloyd, Germany's biggest
container line, lost $680 million. NYK of Japan
posted net losses of $694 million,
AXS-Alphaliner research shows.
Jan Tiedemann, a shipping analyst with
AXS-Alphaliner, said the companies were dealing
with less cargo, lower freight rates for the
cargo that remains, contractual obligations for
new ships they don't need and the inability to
rid themselves of older vessels quickly enough
by scrapping them to reduce overcapacity.
"No one in the industry is making money,"
Tiedemann said.
Dekker of Drewry Shipping Consultants said
shipping lines had been able to increase their
freight rates for handling a 40-foot container
from less than $900 during the summer to $1,450
in September, but he added that "last September,
they would have been able to charge $2,000 for
the same container, so they are not even back to
breaking even yet."
As landlords, seaports have been responding to
their tenants in ways that would make a
financially struggling apartment dweller green
with envy.
Kathryn McDermott, deputy executive director of
business development for the Port of Los
Angeles, said there was a 10% discount on the
rate that customers normally had to pay to move
containers through the port. She added that the
port's Infrastructure Cargo Fee had been
postponed indefinitely "until we are sure that
we need it."
"We have had customers ask us for help and we
have looked very carefully at what we can do,"
said McDermott, who said the reductions amounted
to about $20 million in relief. "The majority of
them said that we really needed to look at our
discretionary cargo, business that could go
through other ports. These changes are aimed at
trying to protect that cargo."
The Port of Long Beach has taken similar steps,
spokesman Art Wong said. Tenants have not asked
for full-scale renegotiation of leases, he said,
in part because of new requirements they might
face, such as environmental restrictions.
"The thing about a long-term lease is that you
are protected from new requirements. Reopening
them is a big roll of the dice," Wong said.
If there is a silver lining for Southern
California, it's that the trade from Asia to the
West Coast is expected to recover faster than
other trade routes, according to IHS Global
Insight, a business research firm in Lexington,
Mass.
IHS Global Insight also said retailers that had
been looking to diversify their warehouse and
distribution networks to rely less on Southern
California had delayed those plans because of
the recession and stayed put.
Paul Bingham, managing director of global
commerce and trade for IHS Global Insight, said
his firm predicted a 10.1% growth rate next year
over 2009 levels in international trade, but he
added that the figure masked a great deal of
weakness. Part of what will make 2010's
international trade figures a double-digit
improvement over 2009 will be rebuilding
inventories for warehouses, not direct sales.
"It will sound like a booming market in 2010,
but it will come after a year in which trade
fell by 20%," Bingham said. "There will be a
recovery, but not at the trade rates we were
accustomed to in 2006 and 2007."
Source: LA Times
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