Ready for a cargo surge

Cargo has been flowing through US ports with surprising ease over the past two years. Despite continued growth in the number of ocean containers entering the US, there has been no repeat of severe congestion that spread chaos through corporate supply chains in 2004.

But while US ports are learning to cope better with surging volumes of cargo from Asia, experts warn against complacency. Much of the US freight transport system continues to operate close to full capacity, with container traffic forecast to more than double over the next 15 years, on top of 8% annual growth since 2002.

US ports are responding through a combination of capacity expansion and increased productivity.

By far the most congested bottleneck is at Los Angeles and Long Beach, which receive almost half of containerized cargo arriving in the US.

Until two years ago, America’s two largest ports were open to trucks for only nine hours each weekday. Extended hours helped Los Angeles and Long Beach handle a record 15m containers last year – up 11 per cent from the year before – without serious delays.

As west coast ports creak, shipping companies and their customers are looking for alternative gateways to the US. A long-awaited expansion of Panama Canal, scheduled for completion in 2014, will allow bigger ships to cross from the Pacific to the Atlantic, fuelling further growth in US east coast ports.

Analysts say ports alone cannot solve the capacity crunch in the US freight transport system. Improvements in port productivity must be matched by action to tackle congestion on US roads and railways.

The Financial Times, March 27^th, 2007

№ 32

OBSTACLES IN THE WAY OF AN INLAND SHIFT

Transport is changing in China as rising prices in highly-developed coastal areas and rising domestic demand push economic activity into less developed inland areas. While the small vessels have always played a part in moving goods to and from the ports on China’s coast, they are becoming increasingly important because manufacturing is no longer so concentrated in places a short truck ride from the sea.

The inland shift is forcing transport and logistics companies to think about how to organize efficient, reliable, cost-effective transport over distances of sometimes thousands of kilometers from industrial zones to either Chinese consumers or big international gateways.

The challenge is being met partly through foreign investor’s expertise and improving infrastructure.

Transport costs typically account for 23% of the cost of a delivered product in China – more than twice the level in Europe and North America.

Yet it is clear in the trucking and air cargo sectors that rapid improvements are under way. Progress has been less marked in inland waterways and coastal shipping where users complain about the stranglehold of a few state-owned monopolies on operations.

However, the sector enjoys advantages from its low costs and the location of even the latest economic development near the Pearl and Yangtze Rivers.

Progress has been slowest on China’s railways, which suffer from limited capacity and tend to shunt freight out of the way make way for passenger trains and military shipments.

Still a rapid improvement in performance would be no surprise in the railways, given how quickly other modes of transport have improved.

The Financial Times, March 27-th, 2007

№ 33