“Slow down and get it right”!
Remember Fran Inman? She was the wise lady in LA that warned port officials about pushing toward a “tipping point”. They ignored her, of course, and continued their pursuit of the loot by imposing fee upon fee and fine upon fine on containers and shippers utilizing So-Cal ports.
Well, she was right, and an article in today’s Journal of Commerce confirms how accurate her suspicions were.
“So-Cal Port Charges Send Cargo Elsewhere — High cost of fees begins to divert ships to Pacific Northwest, East Coast,” is how Bill Mongelluzzo begins his report.
“Clean truck fees and other charges in Southern California are hastening the diversion of cargo to ports in the Pacific Northwest and the East Coast.
“‘Everyone is in a fight for survival. Fifty dollars makes a difference in today’s economy,’ David Arsenault, vice president and regional manager of Hyundai Merchant marine, told the annual Town Hall transportation meeting at California State University in Long Beach.
“The ports of Los Angeles and Long Beach on Feb. 18 began collecting a $ 35 per-TEU clean-truck fee on non-compliant trucks calling in the harbor as part of the ports’ Clean Air Action Plan.
“The new fee is in addition to existing charges such as the Alameda Corridor and PierPass extended gate fees. If shippers had to pay all of the existing and planned port fees in Southern California, the cost of shipping a container through Los Angeles-Long Beach would increase by as much as $ 200.
“Furthermore, all modes of transportation must introduce lower-emission vehicles and cargo-handling equipment into their operations in order to meet strict pollution standards in the ports’ clean air plan.
“This layering of costs is making Los Angeles and Long Beach, already the costliest ports in the country, even more costly for carriers and cargo interests, said Patty Senecal, director of California government affairs at the International Warehouse Logistics Association.
“While California is the unquestioned leader in pursuing green initiatives, ‘there is a price for being first,’ she said. Before promulgating any new environmental restrictions, the ports and state regulators were urged to carefully balance the costs and benefits of their actions. ‘Slow down and get it right,’ Senecal said.
“Being the high-cost port complex is without question causing cargo interests and carriers to divert business to other ports . Beginning May 1, a service operated by Maersk Line with 6,000-TEU ships will leave Southern California and will call in Seattle, said Alan McCorkle senior vice president at Maersk’s sister company APM Terminals Pacific Ltd.
“The layering impact of fees, plus the hidden cost involved in hiring staff to track and manage all the fees, have resulted in Los Angeles and Long Beach losing their position as the preferred gateway for imports in the trans-Pacific trades, said Dan Meylor, Customs administrative manager at Carmichael International Service.”
The above report by Bill Mongelluzzo and the JoC confirms what Ms. Inman had been predicting, and although the folks at the port complex ignored her advice, maybe this revealing article will force those officials to do something positive for a change. Maybe. If ever someone was in a position to say, “I toldja so!!” … Nah, she probably won’t.
What is it with maritime officials, though? Early in August of 2006, a Fitch Special Report discussed the challenges and opportunities of U.S. seaports. The report predicted a cargo slowdown in U.S. ports beginning in 2008 and referred to economic forecasts which indicated declining global growth in 2007. Here’s a direct quote from Fitch’s analysis:
“The expected soft landing of both global and U.S. economies, together with excess vessel capacity, will likely pressure the shipping industry in general, and potentially U.S. seaports. Furthermore, U.S. seaports that depend on dramatically increasing cargo volumes and rates may face a challenging environment after this season if trade patterns shift or consolidation results in a significant realignment in the shipping industry.”
What could be clearer? You’d almost think that Fran Inman collaborated in writing that report.
And Fitch wasn’t alone. Earlier in 2006, the Financial Times criticized the lack of foresight on the part of those ordering unwarranted numbers of megaships. Evergreen’s CEO, Zim’s Tommy Stramer (RIP), Neil Davidson, Nolan Gimpel, James Hartung, Conrad Everhard and a host of others all saw the folly in that ordering frenzy and as often as possible they spoke out against the senseless trend, and we agreed with them in a number of our early commentaries.
They were shrugged off as purveyors of doom and gloom, of course.
In today’s Lloyd’s List, Janet Porter comments, “Those lines that refused to be caught up in the ordering madness of two years ago may be feeling a little smug, but this mammoth oversupply affects the whole industry, and some players will not survive.
“Few may have foreseen the depth of the global economic collapse, but a child could have worked out that capacity expansion of 50% within four years was a recipe for disaster …
“These delivery delays are just tinkering around the edges of a crisis that is not going to go away.”
Those “delivery delays” Ms. Porter writes about are the requests made to shipyards by overeager carrier executives to delay the construction and delivery of the megaships they foolishly ordered. Even if shipyards comply, however, the only thing that will be delayed will be the inevitable.
It’s a “crisis that is not going to go away” says Ms. Porter. You can take that to the bank.