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2013-01-22 11:56:04
What a big American port says about shifting trade patterns
Jan 19th 2013 | LONG BEACH, CALIFORNIA |From the print edition
IF TRADE routes are the global economy s circulatory system, the port of Long
Beach is one of the valves. Last year the port processed 6m containers, making
it America s second-busiest (neighbouring Los Angeles is number one). Nearly
5,000 vessels visited Long Beach in 2012. Their scale is vast. The OOCL Asia, a
container ship observed recently by your correspondent, resembles a floating
car park. It has a capacity of 8,000 twenty-foot-equivalent units (TEUs);
vessels that can carry almost three times as much may be on the way.
Trucks line up at the port entrance, gleaming in the Californian sun: the
grubby fleet of yesteryear has largely been retired by environmental rules. The
containers are unloaded, stacked and eventually picked up for distribution
across America by train if the destination is over 600 miles (966km) away,
otherwise by truck. After the trucks pass through a mandatory check for
radioactivity, many of them will head to warehouses in the Inland Empire, the
urban sprawl east of Los Angeles.
Ports like Long Beach cannot tell the whole story of world trade. Although up
to 90% of trade by volume is seaborne, low-value dry bulk , like the scrap
metal piled up at one Long Beach terminal, accounts for about half of it.
Small, valuable stuff often goes by air. According to Jock O Connell at Beacon
Economics, a consultancy, the average value of a kilo of containerised cargo
arriving at Los Angeles/Long Beach ports in the first 11 months of 2012 was
$6.34; at LAX airport it was $102.78.
But Long Beach still offers a prism on the global economy, and on US trade in
particular. For one thing, the airborne share of trade is declining as the
efficiency of seaborne trade grows. Los Angeles and Long Beach are spending
over $5 billion between them on infrastructure to cope with ever-larger ships.
Long Beach is building Middle Harbour, a 321-acre (130-hectare) container
terminal that will be able to receive vessels of up to 18,000 TEUs. This month
construction began on a replacement for the Gerald Desmond bridge, which will
allow larger vessels to penetrate deeper into the harbour.
The routes plied by these ships provide clues to the strength of the world s
big economies. Throughout the 1990s and 2000s Los Angeles and Long Beach ports
benefited as Asian countries, particularly China, were integrated into the
global trading system (see charts). Container traffic at Long Beach has more
than doubled since 1995. Trade volumes slumped dramatically in 2008-09, and
activity has yet to regain its pre-crisis peak. But the outlook is strong: a
2009 report predicted a doubling of container traffic at Los Angeles/Long Beach
by 2030. A proposed Pacific free-trade agreement could boost maritime trade
further; Europe s doldrums have already seen ships redeployed to transpacific
routes.
The cargoes that fill the ships at America s ports reflect changes in US
consumption patterns (eg, fewer oil imports as domestic production increases).
They also illuminate rising wealth abroad: last year the value of agricultural
products exported from west-coast ports exceeded that of recyclable materials
for the first time, thanks in part to Asia s growing taste for meat.
And the proportion of containers that leave the terminals empty after having
arrived full tells a story about America s persistent trade deficit. Last year
at Long Beach it was about half. This proportion may well shrink. In 2010
Barack Obama called for a doubling of American exports within five years. That
goal is starting to look too ambitious, but the export sector has been
outpacing the economy: in the 12 months to September 2012 American exports of
goods and services were worth over $2.1 trillion, 38% more than in 2009.
A big boost could come from the export, in liquefied form, of the natural gas
opened up by America s shale boom. The Department of Energy must approve all
LNG exports, and licences for most countries are hard to obtain. But producers
are hungry to take advantage of higher prices abroad. Asia currently accounts
for almost two-thirds of global LNG imports. This leaves Pacific states like
California well placed to take advantage, should politicians adopt a more
relaxed attitude.
Other developments may not help the west coast. The much-heralded expansion of
the Panama Canal, now postponed until April 2015, will make room for vessels
with a capacity of up to 13,000 TEUs (only tiddlers below 4,400 TEUs are now
allowed). Over time that could mean a shift of business away from Long Beach to
east-coast and Gulf of Mexico ports, though how much will partly depend on the
canal s fees and the capacity of these ports.
Anthony Otto, president of Long Beach Container Terminal, does not sound too
concerned. Last year LBCT s Hong Kong-based parent company placed a big bet on
Long Beach s future by taking out a 40-year, $4.6 billion lease at Middle
Harbour. The transit times, facilities and cost structure at Long Beach, says
Mr Otto, will ensure it stays the preferred gateway to American consumers for
many shippers.
But some things the port can do little about. One is the growth of
non-traditional trade routes (see article). The China-Brazil connection is
increasingly vital. Pascal Lamy, head of the World Trade Organisation, has
suggested that Africa could be China s biggest trade partner within three to
five years. Another challenge is nearshoring , the shift of manufacturing
capacity closer to American consumers (see our special report). Mexico has been
the big winner here: since 2010 it has outpaced China in increasing its exports
to America. Most goods travel over land: fine news for truckers and trains,
less so for ports.