LA., Long Beach ports fight to stay dominant
Southern California’s twin ports make up the nation’s biggest cargo container hub -- and they’re launching an ambitious campaign to stay that way as they navigate a weak economic recovery and increasing competition from foreign and domestic harbors.
The ports of Los Angeles and Long Beach are aggressively advertising and giving customers discounts at a time when they and most other U.S. ports are wrapping up their worst ever year-over-year decline in shipping business.
In 2009, the two ports moved about 2.5 million fewer containers than the year before, the equivalent of shutting down the country’s fourth-busiest seaport -- Savannah, Ga. -- for the entire year.
The decline has been felt by veteran longshoremen who are unable to find more than two or three days of work a week and by part-timers who find none. It has meant thousands of furloughed railroad workers and idled trains, and warehouse staffers who have been forced to take temporary work.
Coming back from a year like that isn’t the biggest concern of Southern California port officials. Their larger worry comes from new competitors in Canada and Mexico, not to mention U.S. ports on the Gulf of Mexico and the East Coast that have elbowed their way past smaller West Coast ports in the last decade.
That’s a substantial change in just a few years. Trade at Los Angeles and Long Beach -- largely from Asia -- hit a high of 15.8 million containers in 2006, having more than doubled since 1998. The next year’s total was close, at 15.7 million. But last year the two ports handled about 11.7 million containers.
“The days of Los Angeles and Long Beach being the one big river for trade, with just trickles for everyone else, are over,” said Asaf Ashar, a professor at the National Ports and Waterways Institute in Washington. “Now you have as many as seven contenders vying for the same business, and each one of them has very big plans.”
Los Angeles and Long Beach port officials say they are very aware of the threats.
Both ports are launching ad campaigns in trade publications to tout their efficiency in moving cargo, the presence of two national railroads, the huge local market for goods and one of the nation’s biggest warehouse and distribution networks. Because the campaign is just getting started, port officials said, they couldn’t yet give a total price tag.
The L.A. port also is giving customers nearly $26 million in fee and rent reductions.
“This coming year our main thing is marketing,” said Geraldine Knatz, executive director of the Port of Los Angeles. “We have great advantages compared to other ports and we really have to make a point of emphasizing those.”
Part of it, said Richard Steinke, her counterpart at the Port of Long Beach, is pointing out why the two ports are the biggest kids on the block.
“You may save some time or money going to someplace like Canada, but the difference is that you will have a choice of one or two sailing arrivals and departures. Here, you’ll have a choice of 45,” Steinke said.
What’s changed
In 2000 the playing field was very different. Five of the world’s 10 busiest ports were in the U.S. and Europe. Los Angeles and Long Beach ranked seventh and eighth, respectively.
Back then, Vancouver was only the 13th-ranked port in North America, and not even Canada’s largest. Savannah’s port was smaller than Vancouver’s. Manzanillo and Lazaro Cardenas, both on Mexico’s West Coast, had very little traffic. The port at Prince Rupert, on the edge of the Canadian wilderness in upper British Columbia, wouldn’t open for business for seven more years.
Now seven of the world’s busiest ports are in China. Los Angeles and Long Beach rank 16th and 17th. The change reflects not only China’s emergence as the dominant manufacturing economy, but also the way U.S. retailers and the shipping lines that carry their products are spreading their business around.
Retailers have diversified the ports they use, forging a “four corners” strategy that also includes harbors in Canada, the Gulf Coast and the East Coast, said John Husing, an independent economist who tracks the effect of international trade on the Inland Empire, home to one of the nation’s largest warehouse and distribution hubs for import cargo.
That has meant more cargo to places such as Vancouver, Houston and Savannah.
“It may cost a little bit more, and it may be a little slower, but they feel more secure using a variety of ways of getting their cargo to customers rather than simply relying on Los Angeles and Long Beach,” Husing said.
Retailers also have long memories of 2004’s huge traffic jam at the L.A. and Long Beach ports, which was caused by a labor dispute, too few workers and railroad tracks washed out by rain and mudslides.
What’s ahead
Other problems will complicate attempts to retain market share in a more competitive trade world.
“There is a real recovery in volume and trade activity predicted for 2010. But it’s a weak recovery that increases demand but doesn’t get U.S. trade back to where we were in the boom years in the middle of the decade,” said Paul Bingham, managing director of global commerce and transport for IHS Global Insight.
And the world’s largest shipping lines just endured their worst year ever in terms of financial losses. Through the third quarter, the 22 biggest ocean freight carriers lost more than $11 billion, according to AXS-Alphaliner, a maritime research firm in Paris.
After such losses, the shipping lines can be expected to do more of what they had to do in 2009: Stem the red ink by sharing ships and consolidating routes at fewer ports of call.
The final piece is the emergence of a major effort in Canada to link the ports of Vancouver and Prince Rupert via Canadian National Railway. The railway has acquired routes that run south into the U.S. to Chicago, Memphis, New Orleans and Mobile, Ala., in a bid to challenge Union Pacific and BNSF as North America’s dominant railroads.
In Mexico, much attention has been given to the effort to build a major port at Punta Colonet, but two other ports -- Manzanillo and Lazaro Cardenas -- have emerged as the real players, benefited by rail infrastructure improvements by lines such as Kansas Southern.
Together, those four ports in British Columbia and western Mexico handled 4 million containers in 2009, most bound for the U.S.
“We can’t just sit back and assume that we will get rapid growth again at the ports when the recovery starts,” said Jack Kyser, an economist with the Los Angeles County Economic Development Corp. “We are going to have to sing quite hard for our supper.”
