Port traffic snarled by container shortage

With a weak dollar, more companies are looking to export, and a shipping container crunch threatens that trade.

The Associated Press

5/12/2008

NORFOLK, Va. — In a souring economy, even a positive economic development has a down side.

A dearth of cargo containers and a surplus of U.S. goods destined overseas has put a crimp in Virginia’s port.

“We could work right now 24 hours a day if we could get the containers,” said Noel Smith, general manager of Arreff Terminals Inc., a Portsmouth company that packages animal feed into containers bound for the Middle East and Asia.

Smith instead has cut his work force slightly. He says he has the business to fill about 1,000 containers a month, but he’s only able to secure about 600.

With a weak dollar, more companies are looking to export, and the container crunch threatens that trade.

Between 2003 and 2007, Hampton Roads export shipments increased 51 percent, according to the Port Import Export Reporting Service, a research firm.

The problem is finding the containers in which to ship their goods.

A container shortage of this magnitude hasn’t occurred in three decades, port officials said.

“The crazy thing is that nobody forecast this would happen,” Philip Damas, a director of Drewry Supply Chain Advisors in London, told The Virginian-Pilot of Norfolk.

Exporters are also scrambling to find space aboard ships.

Part of the problem is container lines are shifting vessels that had been plying the waters between Asia and the United States to more profitable routes between Asia and Europe, Damas said.

In addition, export containers are frequently loaded with paper, lumber, logs and scrap metal, so they tend to be heavier than import containers. They arrive full of clothes, electronics and other consumer goods.

As a result, ships reach their maximum weights with fewer export containers, said Thomas D. Capozzi, the Virginia Port Authority’s senior managing director of marketing.

With greater competition, shipping lines are now able to pick among the export freight to get the highest rates. Previously, commodities like paper and scrap metal could get cheap rates and easy access to vessel space, Capozzi explained.

That type of freight is being squeezed out by higher-paying cargo such as machinery and other finished goods.

Additionally, higher charter rates for bulk cargo ships have resulted in increased quantities of grain being exported in containers, reducing space for other cargo.

The demand for exporting freight by containers is also driving up those rates — an increase of 20 to 30 percent is expected this year, Damas said.

Shipping officials say it’s difficult to say when conditions for exporters will brighten. An increase in the dollar’s value would help, they say.

Meantime, negotiations to renew major shipping line contracts from Asia to the United States are under way.