The international trade business is foundering faster than ever seen before, with some U.S. seaports watching cargo traffic fall by more than a third.
It's gotten so bad that Los Angeles and Long Beach are slashing cargo rates to keep old customers and lure new business. Oakland's port has laid off 12% of its staff and canceled free tours for the public. The number of ships idled around the world is approaching three times the number that were out of work during the last big ocean trade collapse, in 2002.
"It's phenomenal how much things fell away even since December," said Paul Bingham, managing director of global trade and transportation for IHS Global Insight, the business research firm that monitors North America's biggest ports for the National Retail Federation.
"Assuming the stimulus package works, you end the free fall in the second quarter, when you no longer see this accelerated decline," Bingham said. "If the stimulus does not work, I don't think we know where the bottom is."
There's a huge ripple effect at the docks and roughly 10,000 acres of maritime facilities at the ports of Los Angeles and Long Beach, the nation's busiest. The port complex is a trade gateway that employs more than 280,000 workers in Los Angeles County and annually handles $357 billion in goods. The effect is being felt in the loss of high-wage jobs and in spiraling real estate vacancies in inland warehouse and distribution districts, experts said.
In February 2006, during the last boom year at the L.A. and Long Beach ports, there was work for 1,100 to 1,200 union and nonunion laborers on each day shift, and sometimes for more than 1,500, according to daily dispatch summaries. This February, the average slipped to about 660 workers per day shift. On the slowest day last month, demand for workers fell as low as 384. Jobs opened up for 751 people on the slowest day of February 2006.
As severe as the shift has been in Los Angeles and Long Beach, where February imports fell 18.1% compared with the same month in 2008, it's worse in other places, according to the monthly cargo figures collected by IHS Global Insight.
West Coast ports are bearing the brunt, which some experts view as a troubling sign that cargo is being diverted to other trade gateways.
Oakland is expected to be down 22% in February, compared with a year earlier, as U.S. consumers continue to rein in spending and as retailers cut factory orders to avoid building inventories that won't sell.
Diann Castleberry, the Oakland port's director of social responsibility, said free harbor tours had been conducted from May through October for more than a decade, "providing a bird's-eye view of port operations as well as sharing interesting factoids about its rich history with children and adults."
"The decision to suspend the program was a very difficult one, but one that had to be made in light of the current state of the economy and need to balance the port's financial health," Castleberry said in a notice published on the port's website. The port had already eliminated vacant positions, slashed its capital spending by two-thirds and reduced its workforce 12%.
The February downturn is expected to be 29% in Tacoma, Wash., and 39% in Seattle when those ports finish tallying container movements.
Unlike the West Coast ports, which deal almost exclusively in trade to and from Asia, East Coast ports have a more diversified mix of trade with Asia, Europe and Latin and South America. Still, February trade is down at East and Gulf coast ports ranging from 6.8% at New York/New Jersey to 29.5% at Charleston, S.C.
The months ahead look just as bad, setting up what one trade expert said would be a pitched battle among ports to hold on to current customers and lure others looking to consolidate their operations to save money.
Suggesting that the situation was spiraling out of control, the latest issue from the London-based Drewry Container Freight Rate Report said that oceangoing shipping lines could see their revenues drop $68 billion -- nearly one-third -- in 2009.
That kind of news has set off "a war room mentality" at the Port of Los Angeles, Executive Director Geraldine Knatz said.
"We started meeting with customers and holding management sessions on what we could do to share some of the pain with our customers," Knatz said. At risk is the loss of substantial amounts of intermodal cargo bound for other regions of the country, she said, adding that this cargo, which moves via rail and truck, was responsible for many of the best-paying jobs at the port and was the key to funding the ambitious clean air projects the port has launched.
The port has decided to reduce its lease fees 10% on each container that passes through its facility. It's working on a plan to cut those fees 50% for any new business, Knatz said.
S. David Freeman, president of the Los Angeles Board of Harbor Commissioners, said that "telling customers 'we feel your pain' is not enough. They are hurting and they need this help."
The Port of Long Beach is at work on a similar plan to reduce fees. "We are doing it because trade is in as much of a recession or more so than other parts of the economy, and there is a direct correlation to the reduction in jobs on the waterfront," said Jim Hankla, head of Long Beach's Board of Harbor Commissioners.
"Our customers are searching for new ways to get their cargo from origin to destination, and diversion to other ports is what we want to prevent. We have long-standing customer relationships that we want to keep."