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U.S.-Asia container trade boom fueled by China

July 1, 2005

By K.T. Arasu

CHICAGO (Reuters) – Bales of hay for Japanese beef cattle,soy for tofu aficionados in Taiwan and dolls for American kidsare crossing the oceans in a fast-growing wave of containertrade between the United States and Asia.

Fueling the boom is China, with its seemingly endlesssupply of shoes, furniture and toys to U.S. companies likeWal-Mart Stores Inc. , the world’s largest retailer.

“Containerized exports from China to the U.S. West Coastwill increase 50 percent over the next five years,” said VinceSullivan, Midwest sales manager for Tacoma Port in Washingtonstate, recounting the forecast made last month at a Chinaconference on the container trade.

“That will come fast on the dramatically explosive growthover the last five to eight years,” he told Reuters.

Tacoma’s containerized cargo trade with Asia is forecast togrow by a whopping 35 percent this year over 2004.

Ports on the West Coast of the United States are thrivingin the transpacific container trade because their locationoffers the shortest U.S. route to Asia’s bustling economies.

AMERICAN THIRST FOR CHINA-MADE GOODS

The American thirst for competitively priced goods rangingfrom running shoes to computers and toys that are made in Chinais the catalyst for the burgeoning in-bound container cargo.

The growth in out-bound shipments is being fueled in partby consumers in Asia, especially in Japan, Taiwan and SouthKorea, who are willing to pay up for food products that arepackaged securely in containers to avoid contamination.

“We have seen a substantial growth in both specialty grainand bulk (feed) grain exports, especially going to Japan andTaiwan and to a lesser degree China,” said Bob Zelenka,executive director of the Midwest Shippers’ Association.

The group, based in Minneapolis, helps farmers obtaincompetitive rates to export their products in containers.

“More and more end users, particularly in Japan, are veryinterested in sourcing specialty grain. They want to know whereit came from. They would prefer it came from the farm vs.another step in the chain where it could be commingled.”

Specialty grains like white corn for making taco shells andsoybeans for tofu are grown, harvested and stored separatelyfrom grain for animal feed and often cost 50 cents to $2.00 perbushel more, or 30 to 40 percent more, than feed grain.

In 2000, a type of biotech corn not approved by U.S.authorities for human consumption was found in taco shells,sparking a nation-wide recall of certain brands.

More recently, in June, a variety of corn that had not beenapproved for either food purposes or as animal feed was foundin two cargoes of grain shipped to Japan.

OVERSEAS CUSTOMERS DEMAND CONTAINERIZED SHIPMENTS

Peter Friedmann of the Agriculture Ocean TransportationCoalition, a group that helps agricultural exporters becomemore competitive, said both large and small companies havebenefited from the use of containers to ship their products.

“Overseas customers are demanding containerized shipments.If they are buying a relatively smaller volume, then one or twocontainers of grain can go directly to a bakery, for example.”

He said the growth in demand for containers has led to asupply shortage and put the strain on railroad companies.”Particularly right now, containers are in shortage because ofhuge demand for imported consumer goods from China,” he said.

‘BUSINESS HURT BY HIGHER CONTAINER FREIGHT’

Ronald Anderson, owner of Anderson Commodities in Mentor,Minnesota, said increases in freight rates to ship his pintoand black beans, soybeans for tofu and sunflower seed to hisbuyers have hurt his competitiveness.

“My soybean exports pretty much tripled every year untilthis year. That’s a big change,” he said, lamenting thatfreight to ship his cargoes to Taiwan has gone up to $1,995 per20-foot container from $1,475 five years ago.

“I realize fuel costs have gone up,” he said. “But there’sonly a $200-$300 (profit) margin for me.”

Burlington Northern Santa Fe Corp. , the nation’sNo. 2 railroad company, said it began hauling agriculturalproducts in containers from June last year, reversing a policyprohibiting such transportation due to safety reasons.

“Our customers wanted it,” said BNSF spokeswoman SuannLundsberg. “The transpacific trade is driving a lot of thegrowth in container shipments.”

She said BNSF levies a fuel surcharge due to the high priceof crude oil, which hit a record-high $60 a barrel in lateJune. Lundsberg said BNSF’s volume of containers hauled forexports worldwide grew by 16 percent last year over 2004.

A freight forwarder, who declined to be named, saidcontainer freight rates have increased substantially in recentyears. “Exports have increased a lot, fuel prices have gone upand so steamships started raising their rates,” he added.




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