Storm Clouds Loom for Southland Ports

Ports have always been something communities brag about: the ships, the waterfront and the romance--not to mention the businesses, the jobs and the tax revenue.

And, boy, has there been a lot of bragging around here lately.

On the strength of booming Pacific trade, Los Angeles steamed past New York last year as the nation’s busiest commercial port (measured in the number of freight containers passing through). Sister port Long Beach is fast closing in on the No. 2 spot.

Cargo through Los Angeles more than tripled in volume during the 1980s. And the market share of West Coast maritime trade held by Los Angeles and Long Beach combined has increased dramatically and is now close to 40%.

Meantime, the fabled ports of San Francisco and Oakland have fallen behind. San Diego is an also-ran.

Of course, all this has the local politicians and port boosters busting their buttons and pointing with pride. So why are they also looking nervously over their shoulders?

It’s because the growth is starting to slow down, the stakes are increasing and the competition is heating up.

Armed with statistics on the growth of trade across the Pacific, the ports of the Pacific Northwest--Seattle, Tacoma and Portland--have been selling themselves as faster and more efficient alternatives to the big and congested ports of Southern California. Shippers and steamship lines are being wooed with aggressive marketing campaigns, and some--increasingly fed up with delays and congestion down here--are beginning to think about making a shift up there.

Although no one is willing to say the Pacific Northwest is yet taking away significant business from Los Angeles and Long Beach, there is plenty of concern that it may do so soon.

Let’s start by examining why everybody gets so worked up about ports. Much of California’s economic boom of the 1980s was fueled by imports and exports. This year, the state is expected to receive more than 19% of U.S. imports and to ship almost 17% of all U.S. exports, according to Bank of America.

In Los Angeles, a huge industry has sprung up to handle all these exports and imports. In addition, manufacturing businesses for whom importing or exporting is a significant activity--notably apparel, furniture, chemicals and paper goods--have grown dramatically in the region.

Also fueling the economic boom at the Los Angeles and Long Beach ports has been the predilection of the 14 million residents of the Los Angeles basin for imported goods, especially cars, clothing and electronics. This is the final destination for more than half the merchandise brought into the local harbors.

Of course, good economic times for the past seven years, coupled with the growth of trade across the Pacific, have given a boost to all the West Coast ports. But Los Angeles and Long Beach have clearly taken the biggest share.

And that brings us to the increasing competition, and its potential consequences.

As a result of growth projections for Pacific trade that all port managers have eagerly read, all the West Coast ports have been rapidly expanding. To build new facilities isn’t cheap: Long Beach, for instance, is spending $150 million on a new pier. Obviously, all the ports are hoping to generate enough business to make such investments profitable.

Meantime, the world’s steamship industry--the principal “customer” of ports--has been consolidating. The number of companies in Japan alone has dwindled from a dozen to less than half that in recent years.

Each port, therefore, is ending up with fewer--but bigger--customers. To improve efficiency, the remaining steamship operators are building giant cargo ships that carry more cargo with fewer trips. These ships require deep-water ports--necessitating very expensive dredging, especially at California’s notoriously shallow harbors. (Ironically, the Puget Sound ports are naturally deep.)

What this means is that the stakes have gone up: The expensive improvements are predicated on continued growth, and the dwindling number of steamship operators makes each one that remains more important to the ports.

But now the growth shows signs of slowing. Double-digit increases in cargo volume every year became common in the 1980s, but both the Los Angeles and Long Beach ports are expecting single-digit growth this year. The regional economy is cooling and so is demand for imported cars and auto parts, the biggest single factor in the ports’ growth in recent years.

This makes the heightened competition from the Pacific Northwest ports more worrisome. It isn’t the cargo bound for Southern California that is in contention; it’s the so-called discretionary cargo, usually packed in giant metal containers, that could go through any West Coast port on its way to other U.S. destinations.

And the volume of such freight has increased substantially--much of it in the form of auto parts bound from Asia for the new Japanese-owned auto assembly plants in the Midwest. The ports of Seattle and Tacoma have made a special point of advertising their efficient dockside rail yards that make it easy to transfer cargo containers from ship to flatcar for transfer to their final destination.

Although Los Angeles is the nation’s leader in moving container freight, Seattle now ranks fourth and Tacoma seventh. With much smaller regional economies, both those ports must seek growth by attracting cargo that needs to be transferred elsewhere by rail or truck.

But more than the lean and hungry competitiveness of other ports is causing the concern in Southern California. More than a little grumbling has surfaced from shippers about congestion and delays at local ports.

So much more cargo is flooding the area that it’s not uncommon for some freight to sit for several days before it heads out for its final destination. Neither Los Angeles nor Long Beach has sufficient, close-by rail yards to handle the cargo, shippers complain. Seattle and Tacoma brag about rail facilities only a few hundred yards from the docks. In Los Angeles and Long Beach, the freight is usually trucked to rail yards miles away.

Local port officials, obviously concerned, are rushing forward with plans to streamline surface transportation facilities at the ports. They have also beefed up marketing and service. They worry, at least privately, that some big shippers will bail out if things don’t change.

Then, lurking over all this is the gnawing concern about the effects of slow-growth and clean-air proposals that would restrict trucking during rush hours and reduce pollution from boats, trains and steamships. Some shippers say that could be the final straw.

Once again, Southern California could become a victim of too much success.

CUSTOMS COLLECTIONS AT WEST COAST SEAPORTS In millions of dollars

Port 1985 1986 1987 1988 1989 Los Angeles/Long Beach $2,216.0 $2,361.0 $2,687.0 $2,791.0 $3,113.0 Seattle/Tacoma 517.0 529.8 618.3 635.4 689.1 San Francisco/Oakland 507.6 585.0 548.9 460.4 507.2 Portland* 189.4 227.0 245.6 246.1 270.5 San Diego 15.3 16.5 21.0 20.8 22.1

*Includes airport

Source: U.S. Customs Service