Publication : The Business Times Online
Dates : 14th May 2008
Headlines : Space supply squeeze hits US exporters
Overseas-bound goods wait for weeks to get aboard
(LOS ANGELES) At a time when the struggling US 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 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 US harbours there were too few dockworkers to handle surging imports. Inland rail capacity to the rest of the US was similarly strained. Now, because of the container problem, US exporters find themselves unable to take full advantage of the competitive edge of a weak US dollar.
'We could export a good 20 per cent more in agricultural products from this country if there was the capacity to handle it,' said Peter Friedmann, general counsel for the Washington, DC-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 felt most acutely in the Midwest , said Mr Friedmann and other experts.
'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 Harbour grain terminal, where exports are up 150 per cent this year.
Mr 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 , Mr Friedmann said, missed out on at least US$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 US dollar has combined with growing Asian economies to increase the demand for US goods, increasing the need for containers.
But when the US economy cooled and American consumers began tightening their belts, oceangoing shipping lines pulled as many as 30 per cent 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 is physics, said Asar Ashaf, head of the Washington , DC , 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 US can't carry 8,000 containers of exports from the US 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 ,' Mr 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. Mr 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, Mr 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,' he said.
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, for the return trip to Asia, the shipping lines 'were happy to have anything in them', said Mike Zampa, a spokesman for APL, a subsidiary of Neptune Orient Lines.
Now, with fuel costs soaring and fewer containers available, Mr Zampa and others say that exporters are going to have to pay more to make doing business with them profitable. To combat that, Mr 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,' he said.
Exporters aren't happy with the new balance in the shipping trade.
Mr Friedmann 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,' Mr Friedmann said. 'They just didn't see this problem coming.' - LAT-WP
