Friday, June 13, 2008

U.S. Exporters Face New Hurdle at Home: Full Ships

U.S. Exporters Face New Hurdle at Home: Full Ships
(The Guardian – James B. Kelleher, Reuters)
As U.S. exporters scramble to meet the increased demand for their products created by the weak U.S. dollar, they are running into an unexpected snag: space on ships leaving U.S. ports is suddenly scarce.

So the country's farmers, chemical companies, machinery makers and other exporters are facing delays dockside that erode the currency advantage they enjoy over foreign rivals. Or they end up paying a premium for space that until recently shippers were almost giving away, producers and shippers say.

Timothy Powers, chief executive of Hubbell Inc, an Orange, Connecticut-based electronics maker, told investors this week that in March, his company saw East Coast wait times for cargo space jump from two days to three weeks. "There's a constraint on out-bound containers," he said.

Part of the problem is the weak dollar, which has boosted overseas demand for cheaper U.S.-made products even as it sent costlier imports lower, industry experts and executives say. That's reversed a long-term trend in trade and thrown shippers off balance.

But Brian Conrad, spokesman for the WTSA, a trade group representing major shippers operating between the United States and Asia, says other factors are contributing to the problem, including a surge in demand for U.S. farm goods, many of which are now shipped in containers rather than bulk cargo ships.

Soaring fuel prices also are contributing to the shortage of containers, especially in the nation's interior. That's where most of the agricultural exports are grown. But it's often a thousand miles away from the distribution centers in California and New York where most inbound containers are unloaded.

"It's a more severe problem the further you are away from a port," said Don Westfall, who monitors logistics issues for the Manufacturers Alliance/MAPI trade group.

In the past, shippers would send the empty containers to such remote areas at their own expense. But with trucking companies and railroads slapping steep surcharges on customers to deal with surging diesel prices, Conrad said: "The carriers are asking themselves, 'Does it really pay for us to be moving an empty container at our own expense?'" At a time when other trade routes are booming, the answer, increasingly, is no."For every piece of equipment the carriers have, there are three or four markets where someone is saying, 'I need that container here," Conrad said.

Container Shortage a Weighty Issue

Given the fact that the United States runs a huge trade deficit and imports twice what it exports, it seems odd that the country's exporters would have any difficulty finding space aboard vessels headed overseas. Indeed, for every one container that the U.S. exports, it imports two-and-a-half, according to industry figures.

But the goods the U.S. exports – grains, heavy machinery, chemical products and scrap metal – tend to weigh a lot more than the consumer products it imports.

"The main stuff we import from Asia is clothing and electronics," Conrad said. "That's quite light cargo and you can put a lot of those containers on the ship before it deadweights out. By contrast, export cargo is very heavy ... So you can't put as much of it on the ship."

All of that is creating a headache for exporters, and may help explain why the Commerce Department was forced on Thursday to sharply revise lower its estimate of first-quarter export growth. But not everyone is being affected the same way.

"Generally speaking, what I'm hearing is a moderate level of disruption for some, none for others," said Westfall, who polled Manufacturers Alliance/MAPI members this week. "The weak dollar has tipped things in favor of exports rather quickly and so you've suddenly got a lot of people who were not major exporters trying to export – and you've got fewer ships coming into the United States laden with cargo."

Take the Port of Los Angeles, one of the nation's busiest. In April, the number of outbound loaded containers leaving the port was up 20% from last year. But the number of inbound loaded containers was down almost 11%. Some containers still left LA empty, but that volume was down 30% from last year. "That's the dramatic shift right there," said port spokeswoman Theresa Adams Lopez. In the old days, she said, "that's primarily what we were exporting – empty containers."

With their vessels suddenly filling up, the carriers are beginning to play hardball, especially with smaller exporters. The people who are having problems "have contractual issues, where they negotiated special discounts with the steam ship lines. Now they can't get space on the ships because the lines are saying they only allocated so much space to those fares," Westfall said. "It's like the airlines, where there are only a certain number of discounted seats."

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