Trying to keep the recession at bay

Cargo: New contracts for shipments such as automobiles and forest products should help business, but weak demand for consumer goods will hurt.

Port of Baltimore

January 20, 2002|By Paul Adams | Paul Adams,SUN STAFF

New contracts that will bring additional automobiles, forest products and other niche cargo to the port of Baltimore will help the city's waterfront weather a world-wide recession that has slashed East Coast trade in recent months, business leaders said.

However, most segments of the port's business will feel some pain in the months ahead as demand for consumer goods remains weak.

Ships are still arriving in near-typical numbers, but state pilots and other sources say there is less cargo aboard when they reach Baltimore, resulting in less demand for dock workers.

"When the economy takes off, ports take off. When the economy downturns, historically, ports downturn," said James J. White, executive director of the Maryland Port Administration, which oversees public marine terminals.

The economic cycle is especially mirrored in the lucrative container trade, long considered a weak link in the port of Baltimore's marketing efforts.

The global container business grew in the double-digits for much of the 1990s but declined about 1 percent last year.

After reporting 8 percent growth in container business in 2000, the port of Baltimore expects its loss of container traffic to match the national average for last year. White said the amount might remain stable this year.

"I would say we're going to hold our ground on containers this year because the consumer group is here," he said. "The goods have still got to come to the consumers."

The slowdown is a sobering blow to a port that recorded a string of successes in the past year.

State transportation officials landed the biggest contract in the port's history last year when the Scandinavian shipping line Wallenius Wilhelmsen signed a 20-year lease at Dundalk Marine Terminal.

The deal will bring to Baltimore annually a minimum of 600,000 tons of autos, tractors and other cargo that can be rolled on and off ships, Combined with a growing forest products trade and new contracts with automobile manufacturers, the port is poised for a surge in business.

But maritime leaders will have to wait to realize the full benefits of the Wallenius Wilhelmsen deal. Roll-on/roll-off cargo has diminished as corporations postpone investments in the kinds of tractors and heavy construction equipment shipped through Baltimore. Instead of enjoying record gains, the port is hoping to hang on to market share until the slump is over.

"I think you're going to see our [roll-on/roll-off] numbers over the next couple of years hang about where they are or maybe go down a percentage or a little bit, but there will be a spike somewhere down the road," White said.

Demand is also softening for certain forest products, which have become a major source of growth in the past year. The port handled 575,000 tons of lumber, paper and pulp in the first half of last year, up 31 percent from the 440,000 tons handled during the same period in 2000. Last month, the port went over 1 million tons for the first time in its history.

But as the economy slows, companies spend less on corporate reports and magazine advertising. As a result, paper inventory at port terminals is starting to pile up, a sign of weakening demand.

"It makes it a little more difficult to operate, because your sheds are so full," said Morgan C. "Trip" Bailey, president of BalTerm, a private company that handles the bulk of the port's paper and pulp business.

Demand for pulp, which is used in tissue and other products, remains strong, Bailey said, and opportunities exist for a continued expansion of the forest products business over the next two years, despite the weak economy. Port officials plan to build 150,000 to 300,000 square feet of additional warehouse space this year to help fuel BalTerm's growth.

Automobiles are another bright spot in an otherwise weak economy. Private terminal operators recently signed contracts that are expected to bring as many as 80,000 Honda and 60,000 Hyundai automobiles through Baltimore annually beginning this year.

The deals will vault the port of Baltimore past Jacksonville, Fla., as the second-largest handler of automobiles on the East Coast. The port of New York/New Jersey is No. 1.

"This is new business for the port, which is significant and will offset any slowdown in present business," said James Davis of Amports, the port's largest handler of automobiles.

Demand for copper, aluminum and other bulk products used in manufacturing is also showing surprising strength. Bulk terminal operators said their business has remained stable amid a nationwide decline in manufacturing activity.

"The bulk terminals have been reasonably robust over the last quarter," said Rupert Denney, general manager of C. Steinweg Inc., which handles metals and other material.

Steinweg spent more than $1 million on two new cranes and is investing in additional warehouse space. The company also is seeking permission from Baltimore to build another small terminal.

"So, nobody is throttling back on port infrastructure," said Denney, who is also president of the Maryland Maritime Association.

Signs of construction will be evident at public marine terminals, too. The port administration submitted a 2002 capital budget that included $79 million for new warehouse space, terminal improvements and other projects designed to accommodate Wallenius Wilhelmsen and other customers with growth plans. But the economic slowdown has led port officials to delay some of the spending.

"We're expecting a tough fight in Annapolis for money," White said.

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