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Southern California ports may see calmer waters by year's end

An economist's outlook is a bright spot at a shipping conference. Some warn that Los Angeles and Long Beach are at risk of losing their competitive edge to other ports in the U.S. and Canada.

March 26, 2009|Ronald D. White

The worldwide economic storm might ease by the end of the year, an economist told a gathering Wednesday of international shipping lines, terminal operators, retailers and trucking companies in Long Beach.

"The very worst part of this particular business cycle is occurring in this quarter, but as we move forward through the rest of the year, the decreases will diminish until the fourth quarter, when we actually move into the positive range," said Joseph P. Magaddino, director of the global logistics program at Cal State Long Beach.

That hopeful view came during an otherwise gloomy assessment of the economic pain that would come first, delivered at the annual Pulse of the Ports conference sponsored by the Port of Long Beach. Some speakers warned that the ports of Los Angeles and Long Beach were in danger of losing their competitive edge to other ports in the U.S. and Canada.

The conference was begun in 2005 to get officials from every part of the supply chain talking together to avoid the massive delivery delays that occurred after an unforeseen surge in trade in 2004.

But Wednesday's audience met under much different circumstances, and speakers added some stark numbers to show there was more pain to come. Magaddino said that the global economy would shrink by 0.5% this year for the first time since 1945, and predicted that an additional 3 million Americans would lose jobs before the recession ends.

Peter Keller, president of NYK Line North America Inc., an arm of one of the world's biggest ocean shipping lines, likened the downturn to the time he fell off a boat on a white water rafting trip and was sucked into a whirlpool.

"You have to find a bottom to kick yourself up," Keller said. "It's pretty scary. That is where we are today."

Dean Tracy, director of international transportation for Lowe's Cos. of Mooresville, N.C., said the home improvement retailer would open only 60 to 70 stores this year, or half what it normally does.

Tracy also sounded a warning to the ports of Los Angeles and Long Beach, saying both were getting too expensive given a number of fees for various improvement and environmental mitigation programs. Tracy said the costs came at a time when 11% of the world's ocean freight fleet was out of work.

"Given these economic times, we have to scrape for every dollar," he said. "Freight that we would bring in has moved to other ports. Not the bulk of it, but we have had to move some business."

Keller noted that Southern California ports were very efficient by U.S. standards, but when compared with many Asian and European counterparts, he said: "Costs are going to have to come out of the system. We are going to have to have more productivity.

"Southern California does not operate at world-class standards," he said. "That has to change."


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