Recession pinches Port of Hampton Roads

NORFOLK -- For the past decade, the Port of Hampton Roads enjoyed such robust growth that its leaders almost forgot what hard times looked like. Now they remember.

The port -- three large state-owned marine terminals -- has changed abruptly from an engine of Virginia's economic growth into a mirror of America's economic turmoil.

As demand has slackened for everything from toys to auto parts to home furnishings, fewer ships are calling on the port, and those vessels that do are handling significantly less cargo than they did only six months ago.

"You can basically track all the problems on Wall Street and in the home-building industry right here," said Joe Dorto, president and CEO of Virginia International Terminals Inc., which operates the port facilities. "In 30 years I haven't seen it like this."

After a strong first half of 2008, the port's cargo numbers began dropping. By the end of the current fiscal year on June 30, the total is likely to be down 15 percent to 20 percent from the prior fiscal year, Dorto said.

The port has responded by reducing the shifts and hours of its roughly 2,000 longshoremen; eliminating overtime, pay raises and executive bonuses; and idling some equipment to reduce maintenance costs.

The Virginia Port Authority, the state organization overseeing the port, has delayed by at least a year the start of construction of a planned $2 billion fourth terminal at Craney Island in Portsmouth -- a project once touted as vital to keep pace with the increasing flow of cargo.

The effect of the slowdown reaches well inland from the docks, into a statewide network of warehouses and distribution centers that has sprung up in recent years as the port has prospered. Some of those operations have cut their work forces of mostly temporary employees.

Though not part of the state system, the Port of Richmond stands to lose 75 percent of its business next month when its largest customer, Independent Container Line Ltd., begins rerouting its vessels through Wilmington, N.C. Company officials called the shift a strategic move rather than a response to the sour economy.

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To the untrained eye, the Port of Hampton Roads looks as busy as ever. One recent day, five vessels called on Norfolk International Terminals, the largest of the port's marine terminals. Tractor-trailer trucks lined up at the entrance and exit gates. Back and forth darted nimble straddle-carriers -- essentially hoists on wheels, resembling "Star Wars" battle machines -- carrying metal shipping containers between the docks and the waiting trucks.

But Virginia Port Authority spokesman Joe Harris pointed out that dozens of straddle-carriers normally in the thick of the daily scramble now stand idle in rows in the maintenance yard. And in a storage yard where the containers -- "boxes" in port parlance -- normally are chockablock and stacked three-high, there were wide gaps.

Dorto said the decline has extended to just about every kind of cargo passing through the port, but the greatest loss has been in trade with China, which since 2001 has grown into the port's biggest trading partner.

China had been gobbling up American raw materials and sending back a wide array of finished products, such as toys, housewares and clothing, to fill the shelves of large chain retailers such as Lowe's, Home Depot, Wal-Mart and Target, Dorto said.

"But the Chinese have basically stopped exporting because there's no demand here anymore," he said. "And until we [in the U.S.] start buying their finished products again, they're not going to buy our raw materials."

Shipments of grain through Hampton Roads jumped when rising gasoline prices heightened interest in ethanol, Dorto said, but the interest and the shipments waned when gas prices sank again.

Another major import, South American auto parts, has declined sharply as reeling Detroit automakers have cut production of cars and trucks, Harris said.

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Part of the port's losses came last spring, before the downturn, when the Taiwanese shipping giant Evergreen rerouted its vessels and tens of thousands of containers per year from the state terminals to the new $450 million Maersk Sealand terminal in Portsmouth. Port officials had expected to lose some business to the Maersk terminal, Harris said, but at the time there seemed to be plenty of cargo for all. The Port Authority still regards the Maersk terminal -- where business also has slowed -- as a long-term boon to the port and the region.

The general decline has forced the port to cut back from three dockworker shifts per day to one. Ed Brown, vice president of Local 1248 of the International Longshoremans Association, said members accustomed to working three or four days a week are having to survive on one day's work. Some workers lacking seniority have been forced to go on unemployment, he said.

The state budget proposed by Gov. Timothy M. Kaine includes a 16 percent cut in state contributions to the port over the next two years. The state provides money to the port for capital projects but not for operations, which the port finances through various fees on cargo.

Dorto said every port in the U.S. is feeling the pinch, most of them more severely than Hampton Roads, the third-busiest port on the East Coast after New York and Savannah, Ga. He said he can only hope that President Barack Obama's economic stimulus plan will start turning around the economy in late 2009 by creating jobs and restoring consumer confidence.

Hector Guerrero, an associate professor of business at the College of William and Mary who has studied the port and its inland transportation network, said the network should be able to recover quickly without any permanent damage once the economy rebounds.

Guerrero said the port may even emerge from the economic downturn with a larger market share, if struggling shipping companies decide to concentrate their business in large ports such as Hampton Roads at the expense of smaller ones such as Baltimore.

Dorto said that if history is any indication, the port will see the first signs of economic recovery three months before the rest of the country, as businesses ramp up production and shipping. But there are no signs yet, he said.

Contact Bill Geroux at (757) 498-2820 or .