{"id":849,"date":"2016-03-03T12:25:59","date_gmt":"2016-03-03T18:25:59","guid":{"rendered":"http:\/\/aapaseaports.naymicrosite2.wpengine.com\/?p=849"},"modified":"2020-04-23T08:05:13","modified_gmt":"2020-04-23T13:05:13","slug":"do-ports-know-whats-coming","status":"publish","type":"post","link":"https:\/\/www.aapaseaports.com\/index.php\/2016\/03\/03\/do-ports-know-whats-coming\/","title":{"rendered":"Do Ports Know What\u2019s Coming?"},"content":{"rendered":"

Do Ports Know What\u2019s Coming?
\n<\/strong>Ports can use economic data to their advantage if they know where to look<\/strong><\/p>\n

By Meredith Martino<\/em><\/p>\n

One of the hallmarks of the global financial crisis of 2008 is that so few people saw it coming. The indicators were not pointing toward doom. Yet, there were those who managed to look at the information underpinning the data and accurately predict what would happen to the U.S. economy.<\/p>\n

Director Adam McKay\u2019s film The Big Short, which focused on the collapse of the U.S. housing market and the ensuing devastation on Wall Street, and is based on the bestselling 2010 book by Michael Lewis, was nominated for Best Picture in this year\u2019s Oscars competition. The film garnered wide critical and audience praise in late 2015 for making a complex global economic downward spiral accessible and understandable, which mirrors the response to Lewis\u2019 original book.<\/p>\n

At the heart of McKay\u2019s film and Lewis\u2019 book are characters who saw what was coming before everyone else did. By analyzing the right data in the right way, they felt confident making decisions that everyone else thought were off-base or even crazy. While a handful of savvy, convention-bucking investors figured out how to profit from their insight into the minutiae of complicated financial transactions, they also raised alarm bells and warning signals long before some of America\u2019s oldest banks and financial services firms ultimately imploded in the way these investors predicted.<\/p>\n

The ability of these individuals to know what was on the horizon before it actually happened continues to cast a long shadow as the global economy seems to be in doubt again. Chinese economic growth is slowing down, and oil prices are hitting some of their lowest prices in decades. Stocks throughout the United States, Asia and Europe have been on a (mostly downward-sloping) roller coaster in recent months, and financial analysts are expressing real concern about the state of the world economy.<\/p>\n

Making sense of financial data and economic trends is a priority for any person or organization with long-term financial goals, be it a parent with a child to put through college or a U.S. big-three auto manufacturer making decisions about its manufacturing capacity. It is certainly a priority for ports. While the past few years have given rise to a cautious optimism that the Great Recession has finally loosened its grip on recovery efforts, recent events have shown that the world may be on the brink of something very worrisome.<\/p>\n

Ports are trying to see what\u2019s coming for them by sorting out which data is meaningful to their futures and making wise choices for the good of the communities and stakeholders they serve. While no port is looking for a Big Short-type yield on its investments in assets and infrastructure, all ports are trying to figure out which data to pay attention to and what should be guiding their decision-making.<\/p>\n

Dr. Walter Kemmsies, Chief Economist at Moffatt & Nichol, oversees logistics infrastructure investment studies and produces global trade and economic forecasts. His focus is on freight movement infrastructure investment oriented toward international trade.<\/p>\n

\u201cPorts really need to pay attention to consumer spending,\u201d said Kemmsies. \u201cCargoes need to be natural to the areas [ports]serve.\u201d<\/p>\n

Amidst a sea of data about energy prices, emerging countries\u2019 economies and commodity prices, Kemmsies says that ports\u2019 planning for the future should be most focused on what consumers \u2013 especially regional consumers and industries \u2013 are doing.<\/p>\n

Matt Plezia, Director of Master Planning at the Port of Long Beach, echoed this sentiment. The Port of Long Beach, in partnership with the Port of Los Angeles, just completed a new long-term cargo forecast for the two San Pedro Bay ports. The forecast is a demand-type forecast that is based on macroeconomic trends and also looks at the two ports\u2019 competitive position as a gateway.<\/p>\n

\u201cWe think more about the two ports\u2019 role in the U.S. economy,\u201d Plezia said. \u201cWe respect our role in the global economy and we respect our international partners, but our role in the global economy isn\u2019t as prominent [as our role in the local economy]in this forecast.\u201d<\/p>\n

Plezia emphasized that the two ports historically have focused on accommodating growth, which is driven by the U.S. demand for imports.<\/p>\n

The port\u2019s long term efforts \u201cskip some of the economic indicators\u201d that can be more near-term, Plezia said, and are driven \u201ca lot by demographics and how demographics might drive U.S. [gross domestic product]and what that means for the demand for imports.\u201d<\/p>\n

\u201cWe try to predict domestically the demand for goods and where those things will come from,\u201d he said.<\/p>\n

While the two southern California ports are aware that there may be some shifting of sourcing patterns, specifically to southeast Asia or nearsourcing to Mexico or within the U.S., \u201cthe long-term expectation is that China and northeast Asia will remain more important\u201d as the origin of import cargo.<\/p>\n

For U.S. ports, Kemmsies pointed to U.S. employment numbers, which have been steadily rising in recent months. While much of the world focuses on what\u2019s happening in China\u2019s economy, Kemmsies urged perspective.<\/p>\n

\u201cChinese incomes are still very low compared to U.S. wages,\u201d he said. \u201cA two percent increase in employment in the United States is more significant than a two percent decline in China\u2019s employment.\u201d<\/p>\n

He also pointed out that the U.S. housing market has been steadily recovering.<\/p>\n

However, the U.S. data is but one piece of a much larger economic puzzle.<\/p>\n

Twenty years ago, emerging markets represented only about 12 percent of the world\u2019s top twenty economies. In 2005, they were 25 percent. Now, approximately 34 percent of the world\u2019s top twenty economies are from emerging markets. So the influence of larger, established markets like the United States has been diminished while the sway of markets such as China \u2013 still considered an emerging market \u2013 has grown.<\/p>\n

\u201cChina is trying to slow growth, but it is still growing, not contracting,\u201d Kemmsies said. \u201cThe Chinese government has been too aggressive in constraining growth and needs to pay attention to Chinese consumer sentiment.\u201d<\/p>\n

Plezia also cautioned U.S. ports from overreacting to the ups and downs of the Chinese economy.<\/p>\n

\u201cFor us, China is a producer of products coming to the U.S.,\u201d Plezia explained. \u201cAny contraction of the Chinese economy would potentially impact our export trade with them but not necessarily our appetite for imports,\u201d which are not only store-bound finished consumer products but also include raw materials and components used in U.S. manufacturing.<\/p>\n

In addition to China, Kemmsies also urged ports to pay attention to what is happening in Russia and Saudi Arabia. With Russia, the concerns are less economic and more about the potential for war with other nations, which has the potential to disrupt global markets in a significant way.<\/p>\n

Saudi Arabia, as the leader of OPEC, is still pushing OPEC into fighting to retain world oil share.<\/p>\n

\u201cThey\u2019re fighting technology,\u201d Kemmsies said. \u201cThe whole mentality is not working.\u201d<\/p>\n

U.S. natural gas producers have improved technology and gotten a much better yield as a result. As OPEC nations lost share, they increased production to increase their share and attempt to bankrupt U.S. producers and scare them out of the global energy market, Kemmsies said.<\/p>\n

\u201cOil prices right now are below cost,\u201d Kemmsies pointed out. \u201cThe U.S. yield [on natural gas]is getting better all the time.\u201d<\/p>\n

And these energy prices are playing a huge role in other commodities. Both oil and natural gas are the feedstock for plastic pellets that are becoming the number one U.S. export.<\/p>\n

\u201cSteel and plastic are the two most important commodities in the modern economy,\u201d Kemmsies said.<\/p>\n

The U.S. market for energy is changing rapidly with the growth of the natural gas industry and also with the recent lifting of the U.S. oil export ban. In January, ConocoPhillips shipped crude through the Port of Corpus Christi, TX, to Germany. This was the first export of U.S. crude in more than 40 years.<\/p>\n

\u201cU.S. refineries are complex and can handle any kind of oil,\u201d Kemmsies explained. \u201cBut other parts of the world have simple refineries, so the U.S. will begin exporting light, sweet oil and importing heavy oil.\u201d<\/p>\n

Accommodating this trend will be one element of port industry growth in coming years. Both Kemmsies and Plezia said ports need to be focused on capacity.<\/p>\n

\u201cImports are doing better now but exports will improve,\u201d Kemmsies said. He urged ports to maximize efficiency but also look to expand their footprint.<\/p>\n

\u201cIn the near term, look to optimize dwell time. In the medium, address density. In the long term, focus on acreage,\u201d he suggested.<\/p>\n

Plezia\u2019s team at the Port of Long Beach is doing just that by taking the long-term cargo forecast and using it in a long-term land use study.<\/p>\n

\u201cTerminal operators and carriers are thinking about this year and how to manage the peak,\u201d he said. \u201cWe are thinking long-term. The land use study is an attempt to pull together our tools [including the cargo forecast]in a more holistic way.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

Do Ports Know What\u2019s Coming? Ports can use economic data to their advantage if they know where to look By Meredith Martino One of the hallmarks of the global financial crisis of 2008 is that so few people saw it coming. The indicators were not pointing toward doom. Yet, there were those who managed to …<\/p>\n","protected":false},"author":30,"featured_media":850,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4,442],"tags":[],"class_list":["post-849","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-features","category-leadership"],"_links":{"self":[{"href":"https:\/\/www.aapaseaports.com\/index.php\/wp-json\/wp\/v2\/posts\/849","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.aapaseaports.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.aapaseaports.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.aapaseaports.com\/index.php\/wp-json\/wp\/v2\/users\/30"}],"replies":[{"embeddable":true,"href":"https:\/\/www.aapaseaports.com\/index.php\/wp-json\/wp\/v2\/comments?post=849"}],"version-history":[{"count":0,"href":"https:\/\/www.aapaseaports.com\/index.php\/wp-json\/wp\/v2\/posts\/849\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.aapaseaports.com\/index.php\/wp-json\/wp\/v2\/media\/850"}],"wp:attachment":[{"href":"https:\/\/www.aapaseaports.com\/index.php\/wp-json\/wp\/v2\/media?parent=849"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.aapaseaports.com\/index.php\/wp-json\/wp\/v2\/categories?post=849"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.aapaseaports.com\/index.php\/wp-json\/wp\/v2\/tags?post=849"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}