Question : Answer the following questions related to the article below:
Answer the following questions related to the article below:
1) What sort of market is being discussed here ? (Is it a goodsor a factor market?)
2) Which side of the market is most important to the content ofthis article ? (Is the supply side or the demand side moreimportant?)
3) What are the shift variables involved? How have they changedand what effect have those changes had on price and quantity in themarket?
4)What type of market structure exists on the supply side? (Ifthe article deals with the supply side.)
COMPETITORS ARE EATING INTO L.A. PORTS'DOMINANCE
Early morning on April 19, the massive Maersk Edmonton moored atthe nation's biggest cargo terminal, in the Port of Los Angeles. At8 a.m., around 200 workers, operating nine cranes, swarmed the1,200-foot-long ship.
By week's end, continuous shifts of workers had emptied theship, which carries more than 13,000 container units when fullystocked, onto trucks headed to nearby warehouses or to trainsheaded across the country.
That seamless choreography is a point of pride for port leaders,who say they've moved past the dysfunction that plagued theirbusiness a year ago and are prepared to hold the line against evermore aggressive competitors.
March capped off the busiest first quarter ever for the Port ofLos Angeles, and the biggest since 2007 for the neighboring Port ofLong Beach. Imports at the two ports increased by 10% over the sameperiod last year, as measured by loaded container units.
But ports in other parts of the country, from Houston to NewYork, have poured money into infrastructure projects to make theircoastlines deeper and their terminals more efficient. Now they areslowly eating into the L.A. area's dominance as a gateway to U.S.markets.
In the first three months of2016, Los Angeles and Long Beach took in 37% of all imports to thecountry arriving in containers, down from 43% during the sameperiod in 2007.
That shift could accelerate laterthis year, if an improved Panama Canal opens and siphons businessfrom the West Coast.
"We have witnessed a precipitousdrop in market share, based on some things we didn't do well, andports across the U.S. and Canada did to step up their servicecapabilities," said Gene Seroka, executive director of the Port ofLos Angeles.
New York, the third-largest portin the country, has gained steadily. So have smaller entry pointsin cities such as Savannah, Ga., Charleston, S.C., andHouston.
"These areas are hungrier. Placesthat are poor and want to get better are going to try to find acompetitive advantage against a place that is richer," said JoelKotkin, a fellow at Chapman University who has researched thegrowth of Gulf Coast trade.
The L.A. ports became socongested last year that shipping lines and the companies payingthem had to divert their cargo elsewhere.
As talks between dockworkers andshipping companies deadlocked in the fall of 2014, and terminalsstruggled to handle ever-bigger vessels, ships berthedelsewhere.
Even before the labor disputepeaked, the ports were moving to better coordinate ships, terminalsoperators, workers and truckers. They helped make it easier fortruckers to access the trailers needed to transport containers.They encouraged shipping companies to load their cargo in Asiamethodically, so that dockworkers wouldn't have to spend timeseparating goods destined for different retailers on the LosAngeles shores.
All the while, the ports investedin technology.
The TraPac terminal, staffedalmost entirely by robots, opened in the L.A. port 17 months ago.Today its 28 red cargo-carrying machines hum along, in relativesilence, moving containers onto a set of gleaming, self-drivingvehicles.
A handful of people participate,often from behind computer screens — directing, say, an automatedcrane to lower containers onto trucks as they leave theport.
On April 7, the Port of LongBeach received the first ship at its own automated terminal, calledMiddle Harbor, which is expected to formally open for businesslater this year. When Middle Harbor is fully built out in 2020, itwill be able to handle about half the traffic that moved throughthe entire port in 2015.
There is little the local ports can do, though,to stem the increased flow of goods to the Southeast.
That region is in the midst of apopulation boom — Florida, Texas and the coast of the Carolinas arethe fastest-growing areas of the country, according to the U.S.Census.
It's also undergoing amanufacturing renaissance. Factory investments include a $1-billionexpansion at a BMW plant in South Carolina in 2014 and the openingof an Airbus production facility in Alabama last year.
The influx of cargo to southeastports "is a function of servicing an industrial market and anexpanding population base in the eastern part of the UnitedStates," said Jock O'Connell, an international trade economist withBeacon Economics.
That doesn't mean Los Angeleswill lose its shipping-traffic title any time soon.
The area has natural advantagesthat won't go away. It faces Asia, the source of nearly 70% ofAmerican imports that arrive by sea. Its port waters are deepenough, and bridges tall enough, to accommodate ever-growingships.
The biggest ship that visitsNorth America, the Benjamin Franklin, arrived in L.A. on Friday.Wider than a football field, it can carry twice the amount of cargoas the largest ships making those runs four years ago.
Tim Simpson, the head ofmarketing for Maersk in North America, said that his company willgo wherever customers like General Motors, Wal-Mart and Target wantto bring in goods. But even during periods of congestion, thecompany generally advises most companies not to change their supplychains.
The complexity of thosearrangements became obvious during the 2014-15 L.A. slowdown.Maersk routed some of its massive ships through Vancouver, Canada —but so did its competitors. Soon enough, Vancouver becameoverwhelmed too.
Simpson says the "severecongestion that we saw last year has been a non-issue" at L.A.ports this year. He doesn't see any broader threat to the region'sstatus as a powerhouse.
"I don't know how anyone couldpredict a day when L.A. and Long Beach aren't the main hub. So muchof the supply chains of global shippers are built around usingthose ports," Simpson said.
Seroka says the first-quarterboom shows that the ports have won back the trust ofcustomers.
"I cannot attest that we gainedevery container back, but we have made a strong effort to gain amajority of that cargo back," he said.
Romy Taormina is not convinced.Her Pacific Grove-based company, Psi Bands, used to send 100% ofits Chinese-made wristbands, which are designed to ease nausea, onships that went first to Southern California and then up toOakland.
Now she pays five times the priceof ocean shipping to fly the vast majority of the bands in fromChina.
"I have been gun-shy to sendshipments through Southern California," she says.
Taormina says she can't afford toanger customers like Target or REI. "It's more difficult for earlystage companies to survive these types of majorhiccups."
Other considerations could shapethe ports' competitive position.
The International Longshore andWarehouse Union is reviewing a letter sent by the Pacific MaritimeAssn., which represents port operators, to begin discussions aboutextending their current five-year contract, which ends in July2019. If the two sides come to an early agreement, it would buylabor peace and boost shipper confidence. If they don't work out anextension, it could portend more strife and disruption.
The PMA confirmed that it sentthe letter but did not comment further. The union did not respondto a request for comment.
To the south, a newly expandedPanama Canal offers a different challenge.
In June, nearly two years laterthan promised, Panama officials plan to open wider, deeper andlonger locks that can accommodate some of the largest ships comingto the U.S. That could entice those big ships to bypass Los Angelesand keep sailing to Southeast and East Coast ports.
Around 70% of the goods that landin L.A.-area ports do not stay in Southern California, saidO'Connell, the trade economist. But estimates by cargo analystssuggest that only around 5% of those products would be divertedthrough the canal, because the trip from Shanghai directly to theEast Coast is two weeks longer than the one from Asia to LosAngeles, O'Connell said.
In any case, L.A. and Long Beachwill probably continue to be the destination for goods that need toget on store shelves quickly, like high-end sneakers, the latestelectronics and perishable goods.
"The impact of the new set oflocks at Panama will be marginal on L.A. and Long Beach," saidO'Connell, "as long as the West Coast ports operate at relativeefficiency."