Port Traffic Up as Importers Hurry to Beat Hikes in Fees

By DAVID GREENBERG
Staff Reporter

Importers rushing to beat a major price hike in cargo hauling fees drove a spike in container traffic at the ports of Los Angeles and Long Beach in March.

What is normally one of the slowest times of year transformed into a boon in traffic as big-box retailers sought to take advantage of lower fees before increases that could reach 50 percent or more fall into place at steamship lines beginning June 1.

"The ships are coming in 98 percent to 100 percent capacity," said Al Fierstine, business development director for the Port of L.A. "Importers are trying to take advantage of the current rate structure versus what it's going to be."

Container traffic in L.A. last month jumped 29.1 percent to 563,571 TEUs (20-foot equivalent units) from March 2002, while increasing in Long Beach by 3.2 percent, to 354,530 TEUs.

Negotiations between importers (or shippers) and steamship lines are expected to be complete by early May. Currently, shippers pay $1,200 to $1,500 per 40-foot container. The prices could rise by as much as $700 each across the board, according to a number of port officials.

How cargo flow at the nation's largest port complex holds up for the rest of the year also depends on the course of severe acute respiratory syndrome, or SARS.

The virus, which as of April 16 had killed 159 worldwide after emerging in southern China and Hong Kong last November, has put a halt to trips U.S. importers typically make to Asia at this time of year. As a result, some of the design, production and delivery plans for goods shipped to the two ports during the fall has been put on hold.

Some of this work is being handled with telephone and video conferencing, but certain industries rely more on face-to-face contact such as apparel makers who like to feel the texture of materials used and oversee trial fittings.

"Everybody is canceling business trips to Asia because of the fear of SARS," said Jack Kyser, senior economist with the Los Angeles County Economic Development Corp. "We have not seen any interruptions yet in product flows. But people have their fingers crossed."

The maritime trade industry operates on a six-month cycle, so any delays in orders wouldn't have an impact until fall.

Rate battle

Importers, meanwhile, are trying to curtail the rate hike, but they could be fighting a losing battle. With ships already at capacity normally they fill up in May the laws of supply and demand favor the steamship companies.

Even with the maximum price increases envisioned, shippers would be paying less than they were a decade ago. Shippers have had the upper hand in these negotiations for nearly a generation.

"The carriers, for the first time in 15 years, are controlling their destinies," said Fierstine. "They can demand higher prices."

So far this year, L.A. has handled 1.6 million TEUs, up from 1.3 million during the like period a year ago, while Long Beach moved 1 million TEUs from January through March, down from 1.1 million in the year-earlier period.

Most of the cargo is furniture, apparel, consumer electronics, toys and computer equipment.

L.A. gained market share by luring Maersk Sealand away from Long Beach and into its new 316-acre terminal last August.

Long Beach made up for some of its losses when Mediterranean Shipping Co. left L.A. and moved into a 170-acre terminal in Long Beach in December. Matson Navigation Co. also left L.A. for a 70-acre terminal in Long Beach earlier this year.

Both ports have benefited from the $2.4 billion Alameda Corridor, which opened last April, connecting the complex with the rail yards just east of downtown L.A.

But the L.A. port has the advantage of on-site storage rails one for every working rail allowing for cargo to be moved out of terminal yards quicker.

With a weak economy and Maersk gone, "I would think we would be lucky to be flat this year," said Art Wong, spokesman for the Long Beach port.

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