The Economic Equation

Two and two equals four, everywhere … except in the maritime industry.

Last week we heard a California trucking official say that between 30 percent and 40 percent of his drivers were planning to leave the area because of their unwillingness to become employees rather than independent owner-operators, as the Clean Truck program at the Port of Los Angeles required.

We also read that no one seemed to know where the more than 2,300 pre-1989 trucks that were identified and banned last week had gone. It was thought that the drivers were now operating in other areas and were continuing to pollute communities that were outside the ports’ jurisdiction. And that’s exactly what is happening. Those vehicles, in fact, are now servicing Intermodal Container Transfer Facilities where containers are transferred to these older trucks for longer hauls.

Millions of dollars from added container fees are supposed to solve the pollution problems in Southern California – fees that would come ultimately from the pockets of U.S. consumers – but the whole scheme boils down to a waste of time and money. Port officials are obsessed with the idea that all imported containers must be delivered to the LA/Long Beach port complex, whatever the cost. And that cost is rising. The Clean Truck program, which is committed to pay millions for truck replacement, depends mainly upon expected consumer-paid fees. The world-wide economic collapse, however, is throwing everything out of whack and U.S. consumers are already feeling the pinch. Hundreds of thousands are without employment and have little buying power as a result. That’s why cargo volumes at U.S. ports are down about 6.5 percent this year. Reduced consumer demand results in a reduced supply, but port officials act as if nothing has happened.

When the economy began to waver a while ago, we predicted that the headlong rush to build mega-ships would backfire on carriers and would necessitate the “moth-balling” of a number of those vessels. Yesterday, London-based Drewry Shipping Consultants stated in its “Annual Container Market Review and Forecast 2008-09″ that the shipping industry is now going into reverse.

“With the supply/demand balance weakening, the management of capacity will become crucial for carriers over the short and medium terms,” the report stated. “Cascading of ships to smaller trades will be a key focus for carriers in the next 18 months and the laying up of tonnage is not out of the question.” The Drewry report went on to state that carriers “will struggle to find sensible and effective employment. Cascading of tonnage to smaller north/south and regional trades will create new supply/demand imbalances and further weaken rates.”

• If our patented container storage and retrieval systems had been retrofitted in those 29 West Coast ports, as we had advised, the LA/Long Beach complex would be problem-free.
• And if our patented and profitable container ships had been built instead of those lumbering leviathans, as we had advised, the maritime industry would also be problem-free.

[And two and two would equal four, everywhere … even in the maritime industry.]