Export firms missing the boat
At a time when the struggling U.S. economy needs the biggest boost it can get from booming exports, companies and agricultural producers with American goods bound for overseas can’t find enough empty cargo containers and have to wait weeks to get space on ships headed to Asia.
Only a few years ago, the trade bottleneck was the reverse. At U.S. harbors -- particularly the nation’s biggest container complex at the twin ports of Los Angeles and Long Beach -- there were too few dockworkers to handle surging imports. Inland rail capacity to the rest of the U.S. was similarly strained.
Now, because of the container problem, U.S. exporters find themselves unable to take full advantage of the competitive edge of a weak U.S. dollar.
“We could export a good 20% more in agricultural products from this country if there was the capacity to handle it,” said Peter Friedmann, general counsel for the Washington-based Agriculture Transportation Coalition, a lobbying group formed to help growers become more competitive internationally.
“People talk about how important it is to reduce the trade deficit. Well, here is one way to do it, and the opportunity is slipping away.”
The container problem is being most acutely felt in the Midwest, said Friedmann and other experts. Southern California isn’t suffering as much because of its ports’ role as a key gateway to Asia.
Los Angeles and Long Beach moved 15.7 million containers in 2007, nearly three times as much as the No. 3 port, New York/New Jersey, and attracted many more empty containers for shipping back to Asia than any other port complex.
This year, imports through March were down 7% at Los Angeles and 11% at Long Beach, while exports were up 21% and 26%, respectively -- and the numbers of empty containers were down 28% and 25%.
“Last year, I could have called for a ship and had it by next week. Now it takes up to six weeks to book one. There just isn’t enough room on the ships,” said Howard Wallace, president of the Los Angeles Harbor grain terminal, where exports are up 150% this year.
Friedmann said he knew of a California dairy that could have sold 600 more containers of goods overseas, if it had been able to find cargo boxes. A beef and poultry producer in the Midwest, Friedmann said, missed out on at least $10 million in sales overseas for the same reason.
There are several reasons for the bottleneck of exports bound for Asia through the West Coast ports. The weak U.S. dollar has combined with growing Asian economies to increase the demand for U.S. goods, raising the need for containers.
But when the U.S. economy cooled and American consumers began tightening their belts, oceangoing shipping lines pulled as many as 30% of their vessels, and a commensurate number of containers, out of the routes from Asia to the West Coast. They moved them to Asia-to-Europe routes and to routes between Asian countries where the economies were more robust, said Paul Bingham, an economist for Global Insight.
Another problem was pure physics, said Asar Ashaf, head of the Washington office of the University of New Orleans’ National Ports and Waterways Institute. A ship that can carry 8,000 containers of finished goods such as electronics, toys and apparel from Asia to the U.S. can’t carry 8,000 containers of exports from the U.S. back to Asia.
“The exports are heavier -- grains, paper, scrap metals. The ship reaches its tonnage limit much faster, so maybe it is carrying only two-thirds as many containers of exports back to Asia,” Ashaf said.
Also, the shipbuilding industry has placed far more emphasis on building container vessels than on the bulk carriers that used to dominate trade in items such as grains and scrap metal. Wallace said the competition for the limited amount of space available on bulk vessels has made using them much more expensive than container ships. Plus, Wallace said, his Asian customers prefer their agricultural goods shipped in sealed containers.
“Once they start using containers, they don’t want to go back to bulk,” Wallace said.
All of that has combined to make it harder for exporters to find space quickly on container vessels. Spokesman Mark Bagby said that members of Calcot, a Bakersfield-based farmer-owned cooperative with about 1,400 members, said, “We’re having a little trouble finding space on the ships,” even though they are exporting less.
The export problems have been compounded by a significant change in the way shipping lines view empty containers. They were once so plentiful because of the import boom and huge trade imbalance that the shipping lines “were happy to have anything in them” for the return trip to Asia, said Mike Zampa, a spokesman for APL, a subsidiary of Singapore-based Neptune Orient Lines.
Now, with fuel costs soaring and fewer containers available, Zampa and others say that exporters are going to have to pay more to make doing business with them profitable. To combat that, Zampa said, exporters are going to have to put the same effort into logistics planning that importers do on a routine basis now.
“We’re telling them they have to plan ahead, try to even out their shipments, try to take advantage of times of the year when there may be more slack in the demand,” Zampa said.
Exporters aren’t happy with the new balance in the shipping trade.
Friedmann of the Agriculture Transportation Coalition said the fault is with the shipping lines for talking too much among themselves and not enough to their export customers. Many exporters, he said, are willing to pay more to get the empty containers they need -- if only they could get them.
“The mind-set of the shipping lines is that they serve the import cargo. That is where the money is,” Friedmann said. “They just didn’t see this problem coming.”
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