UP, UP, UP…AND DOWN
Exports of containers to the People’s Republic of China through the port of Savannah:
FY 2011 - 193,274
FY 2012 - 228,082
FY 2013 - 229,502
FY 2014 - 239,751
FY 2015 - 221,171
Source: Georgia Ports Authority
WHAT’S IN THE CARGO HOLDS
Top commodities exported to China via container through the port of Savannah in fiscal 2015, as measured by container volume.
Wood pulp, 48,637
Logs & lumber, 33,758
Paper & paperboard, 22,404
General cargo, 10,727
Source: Georgia Ports Authority
Few cargo ships en route to China run the Savannah River at low tide since they can carry more cargo when the water is deeper. Yet one recent day a container ship with steel boxes stacked eight high steamed into the Atlantic Ocean at low tide with no worry of scuffing the river’s bottom.
The ship carried hundreds of containers filled with one of the port of Savannah’s hottest export commodities — air.
The empty containers offered stark evidence of China’s faltering economy and its impact on Savannah and other U.S. ports — an impact felt well inland at big distribution, manufacturing and logistical software hubs like metro Atlanta.
Exports to China through Savannah are down one-third from a year ago and the port, as well as various Georgia industries, is bracing for more pain.
After years of growth sometimes logged in double digits, exports from Savannah are likely to drop 2 percent this year. They rose 9 percent the last fiscal year.
Import traffic continues to do well. American consumers keep buying stuff made in China — Savannah’s main trading partner. The port has just embarked on a 5-year, $706 million project to deepen the channel to handle larger ships.
But Chinese demand has slackened, boding poorly for Georgia in the short run.
“When China, the second largest economy in the world, catches a cold, everyone else is going to feel it,” Georgia Ports chief Curtis Foltz told The Atlanta Journal-Constitution. “Whether it’s forest products, kaolin clay, agricultural products or chemicals, they’re all going to suffer.”
The ports of Savannah and Brunswick account for nearly $40 billion in statewide economic impact and tens of thousands of jobs, according to a University of Georgia study. Metro Atlanta, where much of the cargo is brought for handling at truck and rail terminals, reaps roughly 70 percent of the ports’ economic benefit.
2016 might be Savannah’s worst trade year since the Great Recession, when consumer demand all but died. Yet China’s economic woes — its GDP growth is projected to drop to 6.1 percent in 2016, still high by most nations’ standard but the lowest level there since 1990 — aren’t the only trends buffeting Georgia.
China’s slowdown has also wracked Latin American, African and Australian economies that once shipped huge quantities of oil, coal, copper and cotton to China. With less revenue, those countries, including Europe and Japan, buy fewer U.S. exports.
Strong dollar hurts
A strong U.S. dollar also makes the purchase of American products more expensive for overseas buyers, cutting demand and hurting exports.
The surge in traffic into and out of Savannah was bolstered last year by a West Coast port strike. With labor peace at hand, retailers and shipping lines have returned much of the business to the ports of Los Angeles, Long Beach and Oakland. Savannah, consequently, stands to lose cargo.
“There’s weak demand in pretty much every market around the world right now,” Foltz said. “Combine that with the rising price of our goods and that translates into few exports.”
Cotton and peanuts, two of Georgia’s top export crops, have been hit hard by the global slowdown with exports for both commodities down about 16 percent last year, according to the U.S. Department of Agriculture. A strong dollar and Chinese sluggishness, though, explain only part of cotton’s unpopularity.
China gobbled up 50 million bales of cotton in 2011 from around the world to ensure a steady supply for its mills as well as to control prices. The glut, though, remains. Per-pound prices dropped by two-thirds and Georgia growers lost their biggest customer.
“They got off the market and they’re not buying any anymore,” said Lee Cromley, a Bulloch County cotton farmer and Georgia Cotton Commission board member. “That’s a big part of why we are where we are today. Our exports have gone way down.”
China, three years ago, took in 229,000 commodity-filled containers from Savannah. Last year, the Communists received only 221,000 containers filled with cotton, chemicals, foodstuffs and paper, according to the Georgia Ports Authority (GPA).
USDA reports that U.S. farm exports to China dropped 13 percent, or $4 billion, the last fiscal year. A bigger dip is expected this fiscal year. Christine Lagarde, managing director for the International Monetary Fund, said recently that China’s slowdown will likely keep commodity prices low for a “prolonged period.”
Not as bearish
Walter Kemmsies, chief economist with Moffat and Nichol, isn’t as bearish on China. A growing middle class, with an appetite for consumer goods and quality food, should boost U.S. exports over the mid-term, said Kemmsies whose engineering consultancy advises ports worldwide, including Savannah.
“People see the Chinese stock market dropping and say, ‘Oh, that’s it. Trade will be bad,’ ” he said. “But when I start digging into the data I end up with more imports, worse industrial exports and better consumer exports. I expect a little drop in U.S. exports, maybe zero to 2 percent. And Savannah is pretty typical of other, big U.S. ports.”
Especially when it comes to empties.
About a third of the containers shipped from Savannah in 2014 were empty, the Georgia Ports Authority reports, and most were headed eventually back to China. Last year a whopping 667,000 empty containers left Savannah — half of all outbound containers. That was a one-third increase over the previous year.
The Port Authority of New York and New Jersey reported that empties also rose nearly a third through much of last year with empties out-numbering loaded containers. In August alone, the nation’s largest port, in Los Angeles, handled more than 225,000 empty exports.
Revenue-wise, though, an empty container doesn’t hurt Savannah’s bottom line.
“We don’t get paid any differently whether it’s got paper, cotton, poultry or air in it,” Foltz said. “All I’m moving is a box. But an empty is not good for the U.S. economy.”
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