West Coast ports have sinking feeling

Imports are down. Experts expect another year of little or no cargo growth in 2008. And other harbors are getting serious about luring business away from Los Angeles and Long Beach, the nation's largest seaport complex, and other West Coast ports. Competitors along the East and Gulf coasts, once content to take on whatever Los Angeles and Long Beach couldn't handle, have embarked on major expansion projects. Billions of dollars are being spent to transform the Panama Canal so that it can handle the largest ships. In Canada, a port project once viewed as little more than a safety valve for times of congestion has been elevated to a national priority.

In response to the economic stresses, A.P. Moller-Maersk Group last year pulled about 30% of the vessels that the world's biggest shipping line used to run between Asia and the U.S. West Coast, most of which had been routed through Los Angeles. There may be more to come from other companies.

"The West Coast is threatened," said Wayne R. Schmidt, an associate with British consultant Drewry Supply Chain Advisors.

Schmidt analyzed the Panama Canal expansion projects, strains on rail lines from the West Coast and confidential service contracts and concluded that more shipping lines and retailers will decide they are "better served on a cost basis at East and Gulf Coast ports."

About two-thirds of the cargo arriving from Asia to the West Coast is routed through Los Angeles and Long Beach.

Schmidt was speaking at this week's Trans-Pacific Maritime Conference, sponsored by the Journal of Commerce, which annually brings together West Coast port officials, shipping lines, terminal operators and their customers to discuss the outlook for trade between Asia and the U.S.

The outlook: rough sailing.

Speakers at the Long Beach conference talked about how the dollar's downward spiral was making imports more expensive, the high cost of fuel was driving shipping lines to cut costs and falling home prices and tight credit were damaging consumer confidence.

The financial returns for shipping lines, because of extraordinarily high fuel costs and freight rates that have not kept up with the increase, are "pretty grim," said Ron Widdows, chief executive of the APL shipping line and chairman of the Transpacific Stabilization Agreement, a group of 15 of the world's largest shipping companies. Widdows said that about 6% of the group's Asia-to-West-Coast fleet had been transferred to routes between Asia and Europe, where trafficincreased a strong 19% from 2006 to 2007.