Ports reflect U.S. slump
Forget scrap paper, plastics, scrap metal and the bounty of agricultural harvests. Until this year, the biggest U.S. contribution to the international supply chain were vast mountains of empty cargo containers outbound on ships to China, where they were quickly refilled with the imports on which American consumers have come to depend.
“For the longest time, we used to joke that our biggest export was our fine California air,” said Eric Caris, assistant director of marketing for the Port of Los Angeles. “The good news for us in 2008 is that we are finally exporting more loaded containers than empties.”
From January to July, exports jumped about 23% compared with the same period of 2007 at the nation’s two busiest container ports, Los Angeles and Long Beach. But the export boom overshadows a deep pullback in U.S. consumer spending.
Imports are down so much that the twin ports are on pace to record their second straight year of declines in overall international trade. That hasn’t happened in at least 30 years, despite a handful of national recessions along the way.
The slowdown has hit almost every harbor in North America.
Of the 10 busiest seaports that are tracked every month by the nation’s largest retailers for signs of congestion, only two are doing more business than last year. One is Vancouver, Canada, which is serving an economy much healthier than that of the U.S. The other is Savannah, Ga., which is winning market share as the first big East Coast stop for cargo headed north from the Panama Canal.
Weakness in the U.S. economy is mirrored on the docks, said Paul Bingham, managing director of trade and transportation markets for the Washington-based forecasting firm Global Insight.
“You can find all of the economic symptoms of the downturn in these numbers,” Bingham said. “Unfortunately, this is a bad-news story. We haven’t even found the bottom yet.”
Bingham and other economists even can glean from the port statistics the effect of the Bush administration’s economic stimulus checks, which was minor. Many observers hoped for a turnaround in the second half of 2008, but now they don’t see one happening before the second quarter of 2009.
At the five top West Coast ports -- Los Angeles, Long Beach, Oakland, Seattle and Tacoma, Wash. -- imports were down by as much as 13% through the first seven months of the year.
At Long Beach, where imports fell 12.7%, some of the biggest declines can be found in materials used in home remodeling and new construction, port spokesman Art Wong said, citing a detailed statistical breakdown through June, compared with the same period last year.
Stone, plaster and cement imports were down 15.4%, Wong said. Wood imports were down 12.9%. Furniture and bedding imports were down 10.1%.
Big contractions also are being seen in consumer goods, which retailers are hustling to bring in now to fill shelves for the holidays. Toys and sports equipment imports, usually among the top categories at the Port of Long Beach, were down 16.5% through June, Wong said. Another popular import, footwear, was down 5.2%.
Exports tell a different story.
Aided by the weak dollar, which makes U.S. goods cheaper for foreign buyers, outgoing traffic increased at each of the five big West Coast ports. In addition, the number of empty containers shipped back to Asia for refilling with imports was down by at least 22.1% at each of the major ports.
Some of the bad news could be found even among retailers whose customers tend to be higher income and more secure. One was San Francisco-based Williams-Sonoma Inc., where the theory that high-end kitchenware products were largely resistant to recessionary pressures is being questioned. The company’s second-quarter profit fell nearly 30% to $18.4 million compared with the same period last year, the company said in an earnings conference call Thursday.
“During the second quarter, much to our disappointment, we continued to see significant deterioration in the macroeconomic environment, resulting in progressively declining comparable-store sales throughout the quarter,” Williams-Sonoma Chief Executive Howard Lester said. “Our approach in this environment is not and will not be business as usual, and we are not expecting a quick turnaround.”
Some smaller niche retailers are finding it even more difficult to cope with matters that are beyond their control.
Danish Design of Mission Viejo, a furniture broker for hand-made Danish contemporary furniture crafted of teak, has watched the weak dollar and record fuel prices drive the cost for popular items such as bedroom sets up 30% to 40% to about $3,400 since 2005, owner Henrik D. Eriksen said.
At the same time, Eriksen’s customers have been rocked by the collapse of the housing market, the loss of huge amounts of home equity, increasing credit costs and record fuel prices.
Eriksen’s company has been able to stay afloat, but the two partners he used to share cargo container space with have both gone out of business, and Eriksen is about to close his showroom. His business will operate exclusively through the Internet to reduce costs.
“The Internet is now the only avenue of exposure to these consumers as they are increasingly hard to find,” Eriksen said. “The suppliers and craftsmanship shops in Denmark are going out of business. An entire industry is really being impacted.”
But the most pain, perhaps, is being felt at the bottom, by those who make the least amount of money from the movement of goods through the ports: truck drivers such as Porfirio Diaz. His plight was detailed during a briefing on the status of working-class families last week by the Center for Labor Research and Education at UC Berkeley.
Diaz drives containers to and from the Port of Oakland on mostly short-haul routes. Diaz’s family home is in foreclosure. He maxed out his credit card on a $12,000 truck repair bill and says he can’t afford the newer, less-polluting truck he needs to buy under state pollution-control mandates, even with the grant that could help him pay for it.
“Unless something changes, I will not be able to continue to work as an independent owner-operator working at the port,” said Diaz, who lives with his wife and three children in Alameda County.
Perhaps the one bit of good news for Southern California: The ports of Los Angeles and Long Beach do not figure to lose much market share despite the gloomy economic conditions and costly efforts to clean up diesel emissions that give them the Southland’s worst pollution footprint. That’s in spite of the fact that retailers will be looking for the least expensive ports, especially as the economic slowdown drags on.
“Other ports will take some business,” said Shubhra Jha, director of investment research for C.B. Richard Ellis. “Other ports will do better, but we firmly believe that Los Angeles and Long Beach are not going to lose their national prominence.”
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Woes on the waterfront
Imports have recorded sharp declines at major ports. Figures are for top West Coast ports from January through July, compared with the same period of 2007, for the equivalent of 20-foot cargo containers.
Imports: 2.4 million, -5.5%
Exports: 1.1 million, +23%
Empties*: 986,000, -24.2%
Imports: 1.9 million, -12.7%
Exports: 1.1 million, +23.2%
Empties*: 849,000, -27.4%.
Imports: 470,000, -5.3%
Exports: 560,000, +8.8%
Empties*: 172,000, -26.4%
Imports: 376,000, -6.5%
Exports: 304,000, +22.1%
Empties*: 117,000, -22.1%
Imports: 405,000, -13%
Exports: 279,000, +1.6%
Empties*: 91,000, -37.4%
*Empty containers returned overseas
Source: Times research