Stephen Rees's blog

I was told yesterday by one of my readers that Peter Mansbridge of the CBC had done a story on the expansion of container facilities at Long Beach, California. Four years ago they decided to double their handling capacity. Since that facility opened traffic has halved compared to what it was before the expansion.

I have not yet found the story using Google but I am turning up some useful stats

Asian exports to the US have fallen continuously over the last seven months, and have declined 7.9% y/y to 1.08 million TEU. In the period 01/2008-04/2008, the volumes decreased by 6.4% y/y to 4.24 million TEU.

An analyst said, “Export traffic from Asia to the US is likely to decline further with the housing market slowing down even further after Fanny Mae and Freddie Mac have failed to save the mortgage market.”

source: TT Club The same data is reported by the Economic Times of India

Now at the same time the weak dollar and growing demand in Asia has stimulated US exports

OAKLAND — Container shipping lines in the Westbound Transpacific Stabilization Agreement (WTSA) say they are working closely with U.S. exporters to address continuing space and equipment shortages to Asia. But sorting out the complex operational and cost factors behind those shortages has left both carriers and shippers with difficult challenges. A weak dollar and robust Asian demand for agricultural products, industrial raw materials, machinery, and other commodities, led to westbound cargo growth of nearly 17 percent in 2007, with a further 12-13 percent growth forecast over 2008-09. Other factors have also fueled the explosion in containerized export cargo. For example, earlier this year, commodity demand in Asia and rising grain prices pushed up bulk vessel charter rates to historic levels, causing shippers to shift more U.S. grain exports from bulk ships to containers. While eastbound traffic grew by less than one percent in 2007, the volume of loaded containers shipped from Asia was still more than twice that of loaded container volume for return U.S. exports. That imbalance means transpacific carriers must continue to scale their fleets, routing and schedules for the higher-volume Asia-U.S. “headhaul” segment, and the current soft inbound market does not justify adding new capacity, particularly given record fuel and other fixed operating costs.

Daily Shipping News Archive

Paul Bingham, principal economist with Global Insight Inc., agreed that the U.S. is in a recession, but said the world economy won’t be in 2008. Still, the rate of growth in China will fall below 10 percent for the first time in 10 years, he predicted. “China’s export engine is slowing,” he said. And that will have a negative impact on other emerging economies. As for the trans-Pacific trades, he sees a continuing drop in U.S. imports from Asia, which were down 2.9 percent in terms of container volumes in 2007. “It’s going to get worse before it gets better,” Bingham said.

source: Supply Chain Brain

And several people pointed me to this article in the weekend New York Times

The cost of shipping a 40-foot container from Shanghai to the United States has risen to $8,000, compared with $3,000 early in the decade, according to a recent study of transportation costs. Big container ships, the pack mules of the 21st-century economy, have shaved their top speed by nearly 20 percent to save on fuel costs, substantially slowing shipping times.

The study, published in May by the Canadian investment bank CIBC World Markets, calculates that the recent surge in shipping costs is on average the equivalent of a 9 percent tariff on trade. “The cost of moving goods, not the cost of tariffs, is the largest barrier to global trade today,” the report concluded, and as a result “has effectively offset all the trade liberalization efforts of the last three decades.”

Not surprisingly, manufacturers are starting to bring back production from the Far East and do it locally. Once again, the days of cheap oil are over and they will not come back.

My question is this: why have I found none of this in the continued political tub thumping for the Gateway?

The justification for port expansion and the construction of the South Fraser Perimeter Road – as well as the Port Mann Bridge twinning and Highway 1 expansion – was that additional capacity to cope with growing demand for imports containers from China to the US. We were supposed to get a bigger share of a growing pie. But what has not been acknowledged – so as as I can determine – by the Governments of Canada and British Columbia is that the forecasts of continued traffic growth are both out of date and now quite wrong in terms of the direction of the trend. And the underlying causes of the current trend – the credit crunch and the decline of the US dollar – show no signs of turning around.

What also seems to be ignored is that new capacity that has already been added in pacific ports is not being utilised. When you add to that the completely unsatisfactory ‘answers’ offered to questions raised by the proponent’s documents submitted for review – in general no new data emerged – I begin to wonder what the real motive must be. There are now long lists of questions – and all the government has done is repeat its original assertions. A lot of gaps have been identified – some quite critical. For example, the discovery of the role of the slime on Roberts Bank in keeping the sandpipers going in their long migrations.  The detailed work that went into establishing that so called mitigation sites offered for the PM2/Hwy1 project were already in use for mitigation for earlier projects has never been acknowledged, let alone acted upon.

Falcon keeps repeating that there has been five years of study. But nothing has been learned in that time. And the studies flaws – such as ignoring induced travel, or using a totally unrealistic price for gasoline, or denying the effect that highway expansion has on built form of development (and which Falcon himself is on record as promoting) – are so blatant that surely no-one now can take these protestations seriously.

How bad does project evaluation have to be shown to be for the proponent to admit that the forecasts are wrong and the project – the whole thing – will be a white elephant? That the funds devoted to port and road expansion should be invested instead in alternative ways of transporting people in this region. That freight traffic is not, and never has been, the problem it has been presented to be. That we need sustainable transportation – “increase transportation choice” in the words of the LRSP – and not the 1950′s style freeway building that we know will not work to reduce congestion becuase it never has done, anywhere.