McLean's - American Shipper

The tide in the transpacific is shifting, withshippers seemingly holding all the marbleswhen it comes to negotiating freight ratesin the transpacific trade lanes this spring. Yet crumblingand congested infrastructure, volatile oil prices and continuedgrowth of Chinese exports is putting a damper on theindustry.So it’s in this climate that more than 1,100 in the shippingindustry gathered in Long Beach in earlyMarch to get the skinny on transpacifictrade — and they found out that freightrates are likely to drop, while congestionand infrastructure problems shouldn’tsurface in 2006.So pretty good news for everyone, right?Well, good news unless you’re a carrier, orunless you plan on continuing to ship pastthis year. That’s because most analysts atthe conference predicted a congestion crisiswill be upon the West Coast before thedecade is over, and not even nifty freightrates this year and next can be too soothingin light of that.The conference, held by the Journal ofCommerce, highlighted the key issues that50 AMERICAN SHIPPER: APRIL 2006face Asia/U.S. West Coast trade in upcomingyears:• Growing disparity between Chineseand U.S. port and inland infrastructuredevelopment.• Carrier overcapacity and its rate implicationsfor carriers.• The dwindling supply of affordable landnear ports to build distribution facilities.Congestion“The thing that strikes you first about Chinais the size of their port expansion,” saidDoug Tilden, president and chief executiveofficer of Marine Terminals Corp. “We viewAsian/West Coast trade as a pipeline, andwe view our terminals as being at the otherend ofthe pipelinewith China. When Isee a doubling or tripling ofChinese port capacity, while we’renot expanding port capacity at all, thatleads me to believe there will be problems.The issue of port congestion is not if, butwhen it’s going to happen. How close arewe to the edge?”Tilden said that in order to handle containerthroughput growth in U.S. ports, whichreached 38 million TEUs in 2005, a port thesize of New York-New Jersey would have tobe added each year in terms of capacity.“Previous port congestion has been eventdriven,”Tilden said, mentioning rail mergerissues in the late 1990s, labor negotiationsthat shut down the West Coast ports in 2002,and growth forecast problems that crippledSouthern California in 2004.“In my opinion, the day of the event-drivenport congestion is over. Port congestion ismuch more likely to be systemic and sustainedin the future,” he said.Tilden said diverting out of SouthernCalifornia has long passed as a way for even