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L.A., Long Beach Ports Will See More Cargo Volume

Trade: Study predicts rapid growth for the seaports in the next two decades as they solidify their lead over rivals in the region.

December 18, 1998|DAN WEIKEL | TIMES STAFF WRITER

Los Angeles County's two sprawling ports will maintain their dominance over rival seaports in the Bay Area and Pacific Northwest over the next two decades when cargo volume is expected to more than double, according to a study released Thursday.

After explosive growth over the last decade--and a recent modest slowdown--the amount of cargo handled by the ports of Los Angeles and Long Beach is expected to resume expanding rapidly as Asia's battered economies recover by early 2000, according to the report's most conservative scenario.

The study by Mercer Management Consulting Inc. and Standard & Poor's DRI indicates that cargo volume will increase from about 97 million metric tons in 1996 to slightly more than 213 million metric tons by 2020. A metric ton equals 2,204 pounds.

The Mercer study indicates that rival ports on the West Coast and Mexico will be expanding, but because of their limitations are not expected to come close to realizing the potential of Long Beach and Los Angeles.

Growth in Portland, Ore., Seattle and Tacoma, Wash., may have reached a plateau, the report says, because of rail capacity problems. In Oakland, dredging restrictions might make it difficult for that port to accommodate larger container ships, as Seattle, Long Beach and Los Angeles can.

The report says the Mexican ports of Manzanillo and Lazaro Cardenas will not offer much competition in the decades ahead because they require enormous capital expenditures to expand.

"If we do a collection of infrastructure improvements at the ports and throughout the region, we have the opportunity to be the trading center of the world," said Mark Pisano, executive director of the Southern California Assn. of Governments. "This is what the Mercer forecasts tell us."

Indeed, if Asia recovers faster, cargo volumes could approach a staggering 275 million metric tons by 2020, further solidifying the region's reputation as the largest center for international commerce in the western United States.

"All the glowing things about Pacific Rim trade are probably true over that 20-year horizon," said professor Larry Kimbell, co-director of the quarterly UCLA Anderson Forecast. "Things will be sluggish for another year or so, but five years out, we will probably see tremendous growth in trade again."

Mercer and Standard & Poor's, both located in Lexington, Maine, prepared the cargo analysis for the ports of Long Beach and Los Angeles, which wanted to update their economic forecasts for planning purposes.

The so-called Mercer Report was made public during a board meeting of the Alameda Corridor Transportation Authority. The agency is in charge of building a $2.4-billion expressway for trains that will better link the ports with transcontinental rail hubs near downtown Los Angeles.

In a significant step toward accommodating the projected growth, the corridor authority Thursday approved the sale of $1 billion in revenue bonds to help pay for the enormous undertaking. The project, which is to be completed in 2002, has been described as vital to the region's economic future and the ports' continued competitiveness in Pacific Rim trade.

Corridor officials say the Mercer study indicates that anticipated cargo growth, even the conservative estimate, should be more than adequate to pay off the project's $400-million federal loan and the debt service on the bonds.

"It all fits together very well," said James P. Preusch, chief financial officer for the Port of Los Angeles and treasurer of the corridor agency. "Our revenue stream will be able to do what it is supposed to do."

The Mercer Report offers three growth scenarios for the two ports, which have more than doubled their cargo volumes over the last decade.

The most optimistic view is based on an Asian economic rebound by the end of this month. A more conservative estimate assumes an Asian recovery by mid-1999. The most realistic projection assumes that the Asian economic crisis will continue until early 2000 and even under that scenario cargo volumes are predicted to more than double to slightly more than 213 million tons by 2020.

Still, the Mercer study "might be a little too optimistic," said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp., a nonprofit organization supported by local business and industry.

But Kyser added, "The people who did this study have a lot of expertise. They are not just blowing smoke rings at us. These are numbers we need to pay attention to."

Port officials in Long Beach and Los Angeles said they were not particularly surprised by the Mercer forecasts. Estimates in 1987 and 1993, they said, substantially underestimated actual port growth.

Today, they say, cargo volumes are still increasing at both ports, but at a more moderate rate because of Asia's economic problems.

"Asia and the ports are linked at the hip, so to speak, but I don't think the current crisis will hurt us in the long run," said Larry A. Keller, general manager of the Port of Los Angeles.

In order for the harbors to realize their potential, the Mercer Report says, government must improve port operations as well as truck and rail transportation in the county and elsewhere.

Officials at the two ports say a host of projects is already underway, including the Alameda Corridor, on-dock rail service, new terminal developments such as the Long Beach Naval Station complex, and Pier 400 in Los Angeles, which will add more than 600 acres of space alone.

Improvements also are being considered for transcontinental rail lines leading out of L.A. County. In the San Gabriel Valley, for example, there are plans to spend about $200 million on new railroad crossings to help speed trains along and reduce traffic congestion.

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