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Can the world’s ports handle the surge of cargo forecasted over the next 10 years?

HOUSTON, Texas – 05/04/07 – More than a thousand people from some 50 nations met in Houston, Texas this week for the 25th World Ports Conference, sponsored by the International Association of Ports and Harbors (IAPH).

The main topic of discussion at the event – how can the world’s ports prepare to handle the challenge of an unprecedented increase in world trade?

The expansion of commerce worldwide relies totally on a logistics supply chain centered on deep-water ports capable of handling a vast array of container, break-bulk, and bulk commodities – a reliance that is sure to deepen in coming years as the World Bank predicts that, between 2000 and 2010, the world economy would grow 33% from $30 trillion-a -year to $40 trillion.

But the latest figures show the world economy surged past $41 trillion-a-year in 2004 with China, India and the other rapidly developing countries of Asia leading the list of the fastest growing economies in the world.

The impact of the growing flow of cargo moving through the global logistics pipeline is underscored by the continuing surge of freight crossing the docks at Southern California’s San Pedro bay ports.

If joined into a single entity, the report said, the adjacent ports of Los Angeles and Long Beach rank fifth globally in container activity and are expected to handle a combined 17.2 million containers by the end of this year, a projected 9.2% increase over 2006, according to the new "International Trade Trends and Impacts” report published by the Los Angeles County Economic Development Corp. (LAEDC).

Overall, the report said, international trade activity in Southern California is set to break a record this year despite a slowdown in the nation's economy with the total value of two-way trade moving through the Los Angeles Customs District growing  to more than $375 billion, a 13.9% surge over the $329 billion generated last year.

Americans' unrelenting appetite for imports from Asia is driving growth in local port traffic – a development underscored by the Asian trio of China, Japan, and South Korea topping the list of the ports’ “trade partners” last year.

"As long as we're running the trade deficit and Los Angeles remains the main entry point (to Asia), and Asian companies continue to excel in manufacturing, yes, it's going to continue," said Eduardo Martinez, an economist who gathered the research for the LAEDC study.

With container traffic at the twin ports expected to at least double in the next 15 years to 20 years, concern will remain high over capacity, congestion and environmental effects, the report says.

The two main rail yards serving the twin ports – operated by the Union Pacific and the Burlington Northern Santa Fe – are quickly approaching their planned capacity.

However, BNSF is developing a near-dock rail facility to move containers onto trains using the Alameda Corridor express freight rail lines. This new facility would likely reduce truck traffic on the Long Beach Freeway and decrease pressure on the BNSF’s Hobart Yard, the study says.

Despite attempts to clean up the air, the pollution generated by goods moving in and out of both ports remains a major worry for the surrounding communities making any plans to increase port capacity a tricky political balancing act, said Martinez.

''It becomes a political process ... that may drag out," he said. "The pressure in the room is not going away. It's actually increasing. So it gives it a bit of urgency."
Even without an increase in capacity, shippers from Asia have few options beyond the San Pedro bay ports because other Western US ports "don't have the capacity," said Martinez.

However, a long-term shortage of capacity at the Los Angeles and Long Beach harbors could prompt competing ports in the Pacific Northwest such as Seattle and Tacoma invest in greater capacity.

However, despite the capacity concerns, "shippers continue to have confidence in the ability of the ports to handle the traffic," the report said, adding that international trade created 35,000 additional jobs last year in Los Angeles, Ventura, San Bernardino, and Riverside counties.

Southern California’s San Pedro Bay ports aren’t the only deep water harbors in the world looking the mixed blessing of unprecedented growth and over-burdened capacity in the face.

"We are all facing a shortage of capacity," said Nosipho Damasane, an official with South Africa's port operations, who spoke with the media at the Houston conference.

"In fact, when we look at the statistics, in terms of by 2011, the capacity that we need in the ports, as well as the demand, is the same, which is a problem because, if there is any delay in developing port capacity worldwide, there will be a problem in terms of moving cargo across the countries."

According to Thomas Kornegay, executive director of the Port of Houston and president of the IAPH, "We do talk about the increase in trade and how it is happening and what their estimates are and what our estimates are, so that we can all try to get a handle on what is really going to happen," he said. "Nobody knows the future, we just try to predict what it might be."

The Port of Houston and other US Gulf and Southeast ports such as New Orleans, and Savannah, are facing the challenge of forecasted growth in Asia-sourced cargo that they’re expected to handle once the Panama Canal is enlarged to handle the newest generation of post-Panamax containerships that will go into service over the coming years.

Kornegay says a bigger challenge is expanding facilities to meet demand – especially in the US, where regulations and government approval processes slow down development.
"I was talking with the port director from Shanghai last night and, in four years, he built seven docks," said Kornegay. "In seven years, I built two docks.”

The week-long World Ports Conference is held every two years and is sponsored by the 400-member IAPH, which was founded in 1955 as a forum for discussion and cooperation for the international maritime industry.

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